A Warner Bros. Antitrust Debate With Senator Elizabeth Warren, and the Oscars Go to... YouTube

0:00This episode is brought to you by FX's Love Story, John F. Kennedy Jr. and Carolyn Bissett. The critically acclaimed series explores the undeniable chemistry, whirlwind courtship, and high-profile marriage of one of the most iconic couples of the 20th century. With Sarah Pidgeon and Paul Anthony Kelly leading a cast including Naomi Watts, Constance Zimmer, Alessandro Nivola, and Grace Gummer. Called A Stunning Portrait of Love by Variety, Love Story is Emmy eligible in all limited series categories. Now streaming on Hulu and Hulu on Disney Plus for bundle subscribers. This episode is brought to you by Holiday Inn by IHG.

0:39Everyone knows Holiday Inn, right? Or they think they do. Because though they have the same name, they've got a whole new energy. They kept the global icon status and upgraded pretty much everything else. We're talking modern rooms with real reset mode vibes. Spaces that feel like your living room. just a little more low-key chic, and dining done right, from breakfast to dinner and drinks. Whether you're traveling for work or getting away for a minute, it's comfort that hits different. So yeah, Holiday Inn. It's a new day and a new stay. Book your next day at HolidayInn.com. It is Wednesday, December 17th.

1:14We've been so focused on which of the bids for Warner Brothers Discovery will ultimately win. Will it be Netflix, which has a deal to buy the studio and HBO Max for$83 billion? Or will it be Paramount and the Ellisons who want to buy the whole company for more than$100 billion but got their bid rejected this morning? But what if the answer to who will buy Warner's is neither? Seems implausible at this point, the company's in play, but that's what Senator Elizabeth Warren is fighting for. Warren is the Democrat from Massachusetts and a longtime antitrust activist, not a big fan of mergers in general, and she's been particularly vocal about the sale of Warner Brothers.

1:48This deal looks like an anti-monopoly nightmare, she said when the Netflix deal was announced. A Netflix Warner Brothers would create one massive media giant with control of close to half the streaming market, threatening to force Americans into higher subscription prices, fewer choices over what and how they watch, while putting American workers at risk. She's not alone, of course. Lots of Republican lawmakers have come out against Netflix WBD, certainly would create a streaming behemoth. But also the Ellisons have their Trump and GOP relationships, and Warren has been equally vocal against the Paramount bid, even calling out the Ellisons on Stephen Colbert's show on their own CBS network.

2:28But what power does Warren actually have here? And is it realistic to just say no to any M &A opportunity for Warner Discovery, a company that's being buried in debt and will be left to compete with the likes of Netflix and Google and Amazon, none of which have been particularly regulated over the years? Well, that's a tough question, so thankfully the senator wanted to come on the town to answer them. She's also got some news of a new push to recuse Pam Bondi, the attorney general, from this matter. But mostly I wanted to ask the senator what the options might be for Warners if it's not sold, how Hollywood could possibly compete with big tech, and what she has planned to try to become a problem for the Ellisons and Netflix, regardless of who gets this Warners deal.

3:08So today it's Elizabeth Warren, and can she block a Warner Brothers sale? From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

3:19All right, we are here with United States Senator Elizabeth Warren. This is our first public official on the town. So welcome, Senator Warren.

3:28Elizabeth Warren:Thank you. It's an honor to be here, Matt. All right. So we're going to talk about the logistics of these proposed mergers and your opposition. And I have many questions and forgive me if it sounds a little bit like an interrogation. I want to play devil's advocate a little bit here. But first, before we get going, tell us what your news is, because you have news on this front. Yeah, I just sent a letter off to Pam Bondi, the Attorney General of the United States. Ordinarily, in mergers like these, it would go to the Department of Justice, and that's appropriate to be reviewed to see if the merger is permissible under antitrust laws.

4:09Elizabeth Warren:Pam Bondi has said as Attorney General she intends to be involved. And I just sent her a letter along with Senator Blumenthal saying, no, you need to recuse yourself and stay out of this. And the reason for that is that Bondi was working at a big lobbying firm just before she became attorney general. And that same lobbying firm now represents both of the intended suitors in these deals. It's Paramount and Netflix, but it's Ballard, by the way. And that is a big kind of MAGA-affiliated lobbying firm. And this has been an issue in several instances with this administration. Seems very swampy. But isn't this just like sort of par for the course?

4:57Don't the lobbyists kind of go in and out of administrations? Why is this particular one so offensive?

5:02Elizabeth Warren:All right. So let me start with, yes, it is swampy. But this one actually violates the regulations, which say that for one year after you take this government post. You're not allowed to do any work on behalf of the folks where you were working before. And she hadn't been there a year yet. So this has got a conflict of interest in a very official sense, but also come on. I get it. We can all roll our eyes and seem to be very sophisticated about how floppy something feels. But remember, this is the same firm, Ballard that was representing our dear friends at Paramount when Paramount wanted to do the Sky Dance deal.

5:47Elizabeth Warren:And remember how that one worked? How we do suddenly decides that they're going to settle a 16 million dollar bogus lawsuit because they just want to throw 16 million dollars. Now, that was Sherry Redstone that settled it. It was not the Ellison. Yeah, I know. Well, I just want to put that out there. That was technically the previous owner. Also, when Donald Trump takes exception to the fact that Stephen Colbert calls that a big fat bribe, that Stephen Colbert gets canceled, the whole notion that what's going to happen in the merger space is some variation on pay to play. and you can pay with dollars, you can pay with cryptocurrency, you can pay by sucking up to the president and promising to get rid of a meddlesome news agency or a comedian who tells jokes you don't like.

6:40Elizabeth Warren:That is a real problem, frankly, for our democracy, a problem for our economy, a problem for the whole notion that the corruption now is just open and out there for everyone to see. So Bondi should stay out of this damn thing just on appearance of impropriety. Could you just please? But you know, she won't. I mean, that's the thing about this issue that is interesting. Like I applaud your efforts here. The whole thing smells bad. Many things about these various mergers and the attempts here smell bad. The party's going to the White House, spending time at Mar-a-Lago. Everything smells bad here, but they don't care.

7:21And it just feels like noise, right?

7:24Elizabeth Warren:No, they don't care as long as we let them not. I am a United States senator. And, you know, I'm at least going to use what I got my platform to say, I tell you, bud, I care about this and I'm going to get as many other senators to care. And I'm going to try to embarrass as many Republicans who don't step up and say they care because it's bad enough that they do this, But it is really bad if the rest of us all just stand by and roll our eyes and say, oh, well, there's nothing we can do. Well, to that end, you do have Republicans who are questioning the Netflix side of this deal. Mike Lee, who leads the Senate Antitrust Subcommittee, Daryl Issa, a couple of other Republicans have come out and said that they are at least questioning the Netflix transaction for Warner Brothers.

8:17So let's get into that. And that's where it's more interesting to me, because I'm a little bit more cynical than you. I don't think Democrats have that much power right now to do much about this. But there are senators who are openly criticizing the Netflix side. How could you guys work together to block a deal like this on the Netflix side?

8:39Elizabeth Warren:So look, we have our biggest tool, frankly, is just to get out there and talk about it. And the reason I say that is because the law is already there. You know, we don't need to pass a new antitrust law. The antitrust laws have been there for a long, long, long time. And they're used over and over from industry to industry to industry. It may feel new to the people in Hollywood because it hasn't been used very much there. But the whole idea that these companies get bigger and bigger and then they decide, instead of growing by we innovate some new product, we do better movies than anybody else, we think what we'll do is just buy the competition.

9:25Elizabeth Warren:That is potentially a violation of the antitrust laws. Think about it this way. Your audience is very sophisticated, understands what's happening in the deal. But I always like to think about it as there are three kind of groups of players here. One group are the people who do all the work. You know, the guys who pitch the movie ideas, the ones who are the makeup artists and who are the screenwriters and who are the set designers and the truck drivers. Those are the workers. They actually produce this stuff. Then there are all the people who are listening to this who like movies, who watch them on streaming, who go to the movies.

10:01Elizabeth Warren:Consumers. Right? That's group two. And then the other group are the investors. In this case, it's Netflix. It's Paramount. And that they're the ones who are saying right now, we're going to spend, oh, about a bazillion dollars to buy Warner. Well, it's about$100 billion on the Ellison side. It's less than that on the Netflix. That's right. They say that what they're going to do is, but it's going to return to us bazillions and bazillions and bazillions more. And how's that going to happen? They're not saying, oh, because once we're a bigger company, we'll be able to make bigger movies. Is there anybody who believes they'll be able to make better movies?

10:45Elizabeth Warren:They're not saying somehow they're going to bring in a bunch more customers. What they're going to do is they're going to squeeze the other two groups. They're going to squeeze the workers because there'll be fewer places to picture movies, fewer makeup artists if fewer movies get made, and they're going to squeeze the customers, either on price or maybe on one of these deals, shutting down a bunch of movie theaters. So the idea here is you've got three groups and the investors just, the pitch here in purchasing that Paramount is making is we can squeeze those other guys and make more money for the investors.

11:20Elizabeth Warren:and that potentially is a violation of antitrust laws. I get that, but then that sounds great. And I understand why you are talking about that. In this situation, you have a company, Warner Brothers Discovery, that is on a trajectory to fail. It's got cable networks that are failing, that will go to zero, that throw off a lot of profit right now, but will eventually go down significantly. You've got a movie studio, you've got a television studio that are both profitable on their own, but they're not scaled like some of these other competitors and they're getting their lunch eaten. So why shouldn't the shareholders and the board of these companies look for a better option?

12:03Look for a way to provide this company to another company that could potentially scale up because they're fighting not against each other. They're fighting against YouTube. They're fighting against Amazon. They're fighting against these large scaled media companies that are devouring the market for media.

12:21Elizabeth Warren:So I'm going to argue with you on multiple fronts. I don't think movie production and YouTube shorts are the same market. I think those are different from each other. What we're talking about here in the case of Netflix is the largest streaming service trying to buy the fourth largest streaming service. That is correct. If it's subscription streaming. That's right. It can be even more gigantic. And what can it do with that? Well, it has the potential, because it picks up the movie-making part of this, to actually, Netflix has said repeatedly that they think any time anybody's spending in a movie theater is time they're not spending streaming.

13:00Elizabeth Warren:They don't like that. They don't. You're right. They say they've changed their mind, but I don't believe them. Yeah, exactly right. That's not enhancing competition. That's cutting competition off to drive the consumer into fewer choices and ultimately to up prices on consumers. So I think that one is a real problem. The question that you asked about Warner Brothers, I think, is a question about stupid mergers from the past where they picked up businesses they're not good at. Of course. And listen, this company has been thrown around. The only people that are benefiting from the various transactions of Warner Brothers over the years were the executives who did them and the shareholders who got some momentary lift.

13:47It has been a value destruction exercise for decades now.

13:51Elizabeth Warren:That's right. And they just want to run that play again. I get it. But that's the past. We're talking about this company and where it is right now. And you could argue, you were opposed, for instance, to the Spirit Airlines JetBlue merger. That was blocked and Spirit Airlines declared bankruptcy. Yep. Let's take it here. Warner Brothers Discovery is the Spirit Airlines of Hollywood. Would you like to see them just go under? No, I would like to see Warner Brothers continue to be a strong studio. Now, they may do that by breaking off some of the pieces that are not their expertise, that are dragging them down.

14:29Like cable networks? Yeah. But they throw off all of the operating income for the company. How do you operate a studio and streamer when you don't have that revenue coming from the networks?

14:43Elizabeth Warren:You're saying the only way now to produce movies is if you can do the cross subsidization. You think that is the only economic model? I'm saying that helps. I'm saying these are diversified media companies where one arm benefits the other. For years, Disney was powered by its cable television networks. Now, because they have theme parks, it is powered by the theme parks, and that is helping them make the transition to streaming. that is the benefit of a fully diversified company that was acquired over the years, by the way. They bought different elements of Disney. So now we're in a situation where Warners is really hurting and there are other companies out there in the entertainment landscape that would benefit from having Warners.

15:26Why shouldn't Warners be allowed to be part of another company? I know change is hard. People don't like it. But ultimately, we're talking about the health of the entire ecosystem. Maybe this is better for that. Just putting that out there.

15:39Elizabeth Warren:So the question, Matt, is not whether or not there's any merger that's possible for Warner Brothers. It's not whether or not Warner Brothers can't develop other lines of business or even engage in cross-subsidization within their businesses. The question is the antitrust question, whether or not number one gets to buy number four and become number one plus plus. Yeah, 450 million worldwide subscribers. It's a lot. It would dwarf everybody else. That's exactly right. And the problem is it puts us on the path. Notice what you're talking about now, that all of these have to be so big and so cross subsidized.

16:17Elizabeth Warren:It means you don't get new entry. You don't get the same kind. What you do is you keep shrinking up and shrinking up and shrinking up the number of actual competitors. Well, Netflix would argue, just to be fair, they would argue that the overall viewership, they are fourth in overall viewership. If you include linear platforms and if you include YouTube, the overall viewership is YouTube, then the Disney platforms, then the NBCUniversal platforms, and I believe sometimes the Paramount platforms when CBS has football, that's up there, and then it's Netflix. And that if they buy Warners, the viewership will go from about 8 % to about 9 % in the U.S.

16:55That's what they're arguing. And if you include, you know, it just depends on what the market is. And for antitrust purposes, how do we define the market that we are dealing with here? Is it all viewership and engagement on all platforms? Is it specifically subscription streaming? How are we supposed to divide this? And what, more importantly, would a judge do if a judge were presented with this?

17:18Elizabeth Warren:This is the classic question in almost every antitrust case, because everybody who wants the merger to go through tries to find a way to describe the market that is bigger than the earth itself. So when the two big supermarket giants wanted to merge, what they claimed is, oh, but the market includes all those quickie marts at the gas station because you can buy a package of potato chips. Right. It's like letting McDonald's buy Burger King because food is available everywhere. Because food is everywhere. That's exactly right. David Ellison said it's like letting Coke buy Pepsi because beer is a beverage.

17:56Elizabeth Warren:That's exactly right, because you drink all of it. So that's going to be their argument. But the reality is, ask the people who pitch the movie script. Ask the people who try to do the thing that's one off, that hasn't been done before. When you're pitching succession and nobody wants it and nobody wants it and nobody wants it until somebody takes a risk. Yes. And this was the argument in the Random House case. And it was ultimately victorious that authors would have less choice in who they sell to. And I think that's a really good argument. And that's why the entire entertainment community is looking skeptically at both of these mergers.

18:37Yes. And it's probably why you're on this show, because you're speaking to them And they're pissed about this because they see fewer buyers. But they also see, I think, a vision of Warner Brothers that may not exist in a couple years if it is allowed to continue on the current trajectory.

18:55Elizabeth Warren:But that takes back to the question you were talking about. If there's real value in Warner Brothers, and pause, I'm going to assume there is, or we wouldn't have two outfits trying to buy it. True. Well, it's largely the library and it's the subscribers that HBO Max has. But you're right. There is clearly value there. If there is real value other than simply the monopoly value that you can create, if there's real value there, then all these guys who say it's all about the market, the market, the market, then we ought to see a Warner Brothers that can succeed. The real fear here, go back to the Random House case, because you're exactly right.

19:40Elizabeth Warren:It's not only that there are fewer places if this one merger goes through now, fewer places to pitch your script, to ply your trade. It's that once you get big enough, the thing has a way of accelerating and literally going to one. The best evidence about these giant companies is how they transform. And they transform from companies that are hungry and innovative, changing and developing that first iPhone, developing that first whatever it is, into companies that get better and better out of milking a monopoly, out of protecting their barriers, their borders, out of making sure that there's no competition out there, stomping out the competition before it has a chance to get a foothold.

20:35Elizabeth Warren:And let's face it, in an industry that ultimately relies on creativity, you've got to have the competition. Competition is what makes this work. Yeah, that's how you get a raise. That's how people get paid. And that's how, honestly, the only reason why Warner Brothers has had such a good year at the box office this year with sinners and with weapons and with one battle after another, although that's dicey, but with these movies, is because they were desperate. They were desperate to compete. They had new people running the studio, and they took some chances. And that's a good thing. And what either of these murders is about is trying to tamp that down and have less and less of that.

21:19Elizabeth Warren:And that's why we have antitrust laws, why we've had them for basically for a century now. It's just when you look at this macro landscape, and it is wild to me that the leader in digital advertising is allowed to own the largest television service in YouTube. The fact that Google can own YouTube is still crazy to me, but it is what it is. And these companies in Hollywood are crippled in their ability to compete there. What if Netflix, what if Paramount with the Ellisons can be that company that is a real Hollywood-oriented company that competes with the tech giants? Like this industry is undergoing such seismic change right now.

22:03And why can't we produce a competitor to those big tech giants?