Paramount's Strategy to Beat California, With Its Top Lawyer

21:53Matt Belloni:Both those and what Bonta says he wants, which are the structural remedies, selling off, spinning off assets. What are you willing to do? So let me first say you do remedies when you have harm, when you have a proof of illegality. OK, one, there isn't. You also do them to settle before you get to that determination. Of course, you whenever you have, you know, leverage on one side or that you're negotiating, we want to get out. So we said we would. Of course, it's on my desk. It's on the attorney general's desk. I was shocked when he said upon filing that it was only in the press that he learned about it.

22:31He got it two months ago. He got it two months ago.

22:33Matt Belloni:He got what? He got a list of things you're willing to concede? Absolutely. So read from it. What are you willing to concede? No, these are settlement discussions. Oh, come on. He's out there saying that he's never seen any settlement. So tell us what's in it. I would be shocked. And by the way, We gave it later, once we learned that it hadn't been disclosed to the other state AGs, we gave it to the other state AGs. So every reporter out there listening to this conversation, call your sources at the state AGs office around the country and report on what Paramount is willing to offer. I'm going to do the same.

23:11Matt Belloni:You could totally do that. But out of respect for the AGs and the legal process, we have offered that. This is, you know, if the issue is 30 films, 45 day window, 90, by the way, we're already doing the 45 day window. Voluntarily, voluntarily. There's no, like he says, there is no guarantee. And I've said that too. I like David. I think he's a trustworthy guy. I do not trust him for a second when it comes to that. We've offered to make it enforceable with them. Okay. No response. Crickets for two months. You know why? Because they just wanted to bring a lawsuit. That's fine. but they should settle this thing if they really want an enforceable commitment.

23:53Now, we didn't need a consent decree or a government telling us when David bought Paramount, Paramount had released eight films. Where did it go up to? 15. It'll probably go to 16, 17 next year. And Warners has been languishing. Well, Warners does. And so we'd said it'll be 15 and 15, but here's why. Not because the government's going to be telling us to do so, you know, it is because it's in our economic interest to do so. We need to do that today into the streaming. Absolutely.

24:25Matt Belloni:But not forever. And we don't know in two years you have some flops. I don't want to litigate that again. No, no. But here's this is really important. Here's just why is that? Why do we need to constantly be fueling this? Because the streaming business, the consumer now has the power in the old days. You cancel your cable when you're not happy with something, say, I don't want to spend that money. Today, you will just press a button and shut down your subscription if you're not happy. If we're not feeding them, that churn is going to go up. So we have every incentive. Why would we go out and spend$7.7 billion on UFC?

25:01It's to get customers in. We lowered the price. You don't have to pay 80 bucks every pay-per-view. The consumer's getting it for a totally, for, you know, basically one year subscription fee gets you one pay-per-view. You get every single UFC plus every other show we have.

25:17Matt Belloni:Yes, I know. It's a deal for masochists everywhere. This episode is brought to you by Accenture. When your advertising operations fall out of sync, campaigns slow down, insights get buried, and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com. This episode is brought to you by Accenture.

25:56Matt Belloni:When your advertising operations fall out of sync, campaigns slow down, insights get buried, and opportunities get missed. That's why Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. To learn more, check out Accenture.com slash Spotify. I want to get to the other stuff. Are you willing to sell CNN? I don't think, first of all, we've said we've been open to all legitimate discussions.

26:38What is the harm of CNN? What is the overlap? Where's the antitrust harm? I think if the states are using their state power to try to control speech by who owns it, that's a serious First Amendment violation that nobody should be for, especially the creative community.

26:56Matt Belloni:They would argue that Donald Trump has pretty openly said that we, meaning some mysterious we, him and somebody, are going to make CNN better. So he thinks, whether true or not, that this transaction helps him in putting CNN into your hands. I heard the interview between the president and Jake Tapper. He asked him, would you be on? He said, yeah, I'll come on to you because we want to make you better. That has nothing to do with a merger. People are twisting this stuff. Okay. All right. But you get my points. The politics is stinky on both sides here. But it's got nothing to do with antitrust.

27:31Matt Belloni:That's what I'm saying. But Bonta says that CNN is not enough. He says he wants CNN. But he don't have to take my word for it. He says, but Bonta says he wants CNN sold, but only if it's part of a larger remedy that includes maybe a spinoff of all of the cable networks. Because if he actually said CNN, it would expose it. He's already said it on your interview, I think. News Network, if it's true. No, he has not said it publicly. I have reported that he would like CNN sold. He has publicly denied that. But you know what? Their ringleader is Norm Eisen, who has taken credit for this lawsuit, both here and delaying some UK approval.

28:12And Norm Eisen, you don't have to take my word for it. Look at his email that he sent to his own sponsors and supporters, that how he takes credit for this and talking about this is about CNN. Yeah. This is terrible. It's terrible. For somebody who would die for the First Amendment, I am actually shaken by this type of an effort.

28:33Matt Belloni:Well, a lot of people feel the same on the other side as well. So I agree. The politics stuff is kind of boring to me because I know it's going on and I see it transparently. It is unfortunate, but that's where we are. And if it came to spinning off the television cable networks, you guys could have a business with CBS and the streamer. You don't need the cable networks. You could come up with some deal. I know they throw off a lot of cash and that it does power the entire transaction as you guys have drawn it up, but you could probably get a lot of money in this separate company for this, the same way that Comcast has done spinning off its cable network.

29:08Matt Belloni:So would you consider that? If there's antitrust harm is proven with that, I still fail to see it. When they talk about basic cable, in antitrust, they have to be substitutes with each other, right? Like broadcast stations are substituted. Basic cable is not. MTV does not compete with TNT. CNN does not compete with Nickelodeon. They're all going for the same limited carriage fees. But it's not about the carriage fees. It's about where that demand is. If you have two different products that are complements with each other, it's actually efficiency enhancing. They have to be substitutes for them to come together for you to have a competitive effect.

29:53And that's what he misses. And I guess I guess.

29:57Matt Belloni:But it gives you it gives you outsized negotiation power. If all of a sudden you own the 30 cable channels that have brands that people know about. I can tell you that is every year it's going down. I agree. There's experts because we can't if we stop that licensing, we don't get that money immediately. Whereas the cable operator still gets a subscription fee until those consumers go away. It is going down. I know. The leverage, the leverage is not the same. It's the analogy is like a merger. If the two biggest makers of film projectors merged, like, okay, digital film projection is the future.

30:39Matt Belloni:Those are always going to exist. Christopher Nolan loves seeing his films displayed on film. but it's not the future. That's probably the better argument for you guys to make. But it does give you some pretty big market power negotiating with these cable providers. We get no increased market power to do this. I can tell you this and experts will show that for exactly that reason. I'd like to see that expert report. These are complements. These are not substitutes for each other. All that matters is the NFL and none of those channels have the NFL. CBS is the one that matters which is why I've always thought that if you guys were willing to get rid of CNN, it would have to be for a big price because it delivers a lot of profit to the bottom line.

31:23Matt Belloni:But the carriage battles are going to be won with CBS, including the retrans fees with the retrans abilities. And we already own CBS. We're not getting any more market power. Yeah, that's got nothing to do. No, I know, but that's what I'm saying. You don't need necessarily CNN if you have CBS and all the sports. But Warner Brothers does not have the NFL. There's no combination of any way. So again, this is not, and it's in a market where it continues to be declining. We're not going to have the market power. If anything, we'll be creating the efficiencies by being able to transition those into streaming channels so the consumer ultimately has that ability to have those.

32:06And so, and they'll have it much easier because they don't have to. If you have CNN on your Paramount Plus app, you will be able to watch it anywhere. And, you know, look, I'm a beneficiary. I love watching 60 Minutes and 60 Minutes Overtime. And, you know, I don't know where the heck it is on a channel, but I can watch it anytime on my Paramount Plus. And it's fantastic.

32:28Matt Belloni:Yeah. So just to recap, you are willing to enter into behavioral remedies in writing like your 30 movies a year and other things. Are you willing to commit to a certain amount of production in California? Are you willing to commit to a certain number of jobs retained? Look, nothing, I think, I would just say, look, nothing. Ultimately, obviously, this will be David's decision. But as far as when you're negotiating these types of things, nothing's off the table. It has to be legitimately tied to an antitrust violation. Yeah, but I'm just saying, because Bonta says he is not interested in behavioral remedies that are not enforceable.

33:05Matt Belloni:And he also says he wants structural remedies. So I just want to make sure that I'm getting the correct response from you on that. He has never offered, he has won. He never gave us what, until this lawsuit, what the competitive harm he was asking. He kept on saying, bring us structural remedies in public. And you know what it's like? It's like saying, hey, you're being investigated and I need you to bring a plea agreement to me. What am I being charged with? Is it bank fraud? Is it securities fraud? Is it rape? Is it murder? I'm not going to tell you. Just bring me a plea agreement because that's what I want.

33:41It makes no, this is not the way you do law enforcement with all due respect to the attorney general.

33:46Matt Belloni:All right. Can you commit right now that this moving out of California thing is silly and you guys won't do it? Look, I love competition. I love it when states are competing. How much production has moved to New Jersey and New York? How much has gone to Georgia and Illinois and Louisiana? It's fantastic when states compete. And we want California to compete with tax incentives to keep to make it make it profitable to be here. How much production has moved to the UK? Yeah, but that's production. There is a robust market trying to lure these company, these shoots to different states. Nobody is saying, come set up your 100-person corporate headquarters here until now.

34:34Matt Belloni:And they're doing it because you guys have complained loudly about the regulatory state in California. So are you considering moving to Tennessee or elsewhere? Look, we haven't talked about that. It is safe to say that multiple states have reached out to us to invite us to talk to them about going there. That's a statement of fact. You've read about it. And so, but ultimately, obviously, these are big decisions. David has grown up here. But you're a voice in David's ear. He wants to be in California. We've committed to be in California. We're one of the few companies who's actually moved our headquarters to California last year.

35:13You know, Paramount used to be New York. It's in California. There's a commitment made in California. I can tell you, David, for the last nine months, has made multiple trips. You know, we haven't been out there advertising it about going to Washington, using his capital, using his time to get federal tax incentives to expand production in the United States and in California.

35:36Matt Belloni:Yeah, I saw that that news broke conveniently the same day you were sued. I mean, we were literally on the plane going to Washington when we get sued by our home state. What does that tell you? I get it, but I thought it was a convenient media placement that, you know, bad guy David Ellison is trying to save the entire film industry via incentives. These meetings, there have been multiple meetings. The meeting with the chairman was set up two months before. I understand. You don't make that kind of a meeting with 14 members of Congress, you know, in a day or two. I get it. All right. Everyone in town wants to know how this is going to end.

36:12Oh, this is going to end with this merger closing, period. When? Probably by, you know, I don't know, hopefully by the end of September. Otherwise, my taxpayer, you know, state and as a taxpayer, they're going to be paying a huge amount of damages, which would be really unfortunate to cause the damages, cause the consumer harm and have to pay for delaying this in this way.

36:35Matt Belloni:Presuming there will be a hearing on the preliminary injunction and evidence will be exchanged and experts will be presented. That takes time. And it's probably not going to happen in the dog days of summer. So if this happens in September, October, we're looking at November, December at the earliest, right? Well, the judge would have to rule, I believe, because the max temporary restraining order, again, we stipulated to that is 28 days. So there has to be an injunction in place, which means the judge, again, we've also stipulated that we're not gonna jam her. We would be open to doing that. But you probably need no more than three days of a hearing on the preliminary injunction.

37:19Oh, you think so? Yeah, I don't think you need more than that. Why do you need? This is not a full-blown trial. Again, this is a preliminary injunction.

37:26Matt Belloni:No, but you do have to show that they have a likelihood of prevailing at trial. On the merits, well, they have to show four factors, but yeah, that's a major one that they would have to prove. Remember, the burden is on the government to prove that they would prevail on the merits as well as You know, who's getting harmed more, us or them? Yeah. If the preliminary injunction is denied, you guys close. And assuming that the UK issues are resolved, because there's some question as to a possible delay there as well. What's the status currently? Well, the status is, you know, we anticipate the CMA to rule sometime on August 7th.

38:10And then, you know, the Secretary of Culture has, of course, issued her.

38:15Matt Belloni:you know, she's thinking it's kind of minded to. But she's being replaced, right? Because there's a new government. I don't know. I don't know. I think we'll find out sometime Monday because the new prime minister was just seated. And so she, you know, I think she'll, she'll stay in the cabinet probably, but that would be my end. So we anticipate she'll remain there, but you know, look, we've had a constructive engagement with them. I don't anticipate their issue is media plurality with, you know, the news and all of that. And we don't think there's an issue. We own Channel 5 there. We're not buying a new news asset.

38:48There are big issues probably, you know, who's going to be continuing to produce that? Are we going to change that? I think we respect that and we've had engagements.

38:57Matt Belloni:We don't anticipate that to delay the merger closing. So no injunction, the merger closes in September likely. Injunction, where does that leave us? You either go to trial next year or you settle. Well, no, no. If there's an injunction, we'll have to take a look at what the injunction is based on. And we'll have to take a look. We presumably will have appeal rights. Okay. So you'll appeal. And then the Ninth Circuit will have to figure out this whole case. And you probably feel more confident. To be honest with you, I don't think it's going to get there. This judge is a very smart judge. Look at the way she handles the courtroom.

39:36She is rules-based. and I don't think she's going to end up ruling on a preliminary injunction. I think, you know, TRO makes sense. Give it some time to think. Again, this is like two days after a case was filed and the briefings were done. And so, you know, you have to take a look at what is going on there. I think once she looks at basic facts, again, you don't need an MIT degree to know about these movies and the market I talked about. And then I don't think she issues an injunction. that's you know that the states will have their say am i correct that you didn't think that the ag would sue uh no we always had the contingency that the ag possibly could sue i was hopeful that he wouldn't but once he stopped engaging and wouldn't even respond to our settlement offer

40:22Matt Belloni:i assumed he was going to sue because he felt politically he had to he was getting a lot of pressure by his base yeah no i've said that i said it was politically untenable for him to not sue I've said that. Well, unless you say, no, I got to do the right thing. Well, those are your words, not mine. So the WGA suit, they have a separate lawsuit where they talk a lot more about the job losses and the market for writers and the consolidation of buyers for scripted content. What's the procedure going forward on that one? Is that going to be consolidated here so it'll all be one big procedure? Or is that going to be separate?

41:02Well, the judge's ruling so far said all three will be separate and each party does not get to participate in the other matter. So we'll see where it goes.

41:12Matt Belloni:So give me your response to the WGA. I mean, we all know massive job losses are coming from this deal. We all know that this is going to further constrain the market for scripted content, at least in the short term. And then potentially under your theory, you'll be a competitor to Netflix and be able to buy more. but are they wrong for freaking out about this? Yes, I think they're wrong because when you look at the market, you're spending more money. You create a new competitor in here. You're going to have multiple scale buyers. So it's going to be us competing. Look at, again, you don't have to take my word for it.

41:48Look at the Duffer brothers, right? We competed with Netflix. They're now coming on to us. Look at UFC. They get more. When you have competition, they'll make more. And two, you have to make more content.

42:00Matt Belloni:Look at all the people you've lured from Warner Brothers to make movies for you. And look at all the people that Warner has lured from you. Who? Well, you brought over the Boulder Light producers. Those guys from Warner Brothers came to Paramount. There's going to be all, I mean, look, it's only going to create more competition where this is going. Look, the alternative was going to be Warner is going to split into two companies, which they were going to in June. And they would have been sold to Netflix or somebody else. You know, certainly Netflix was the one who had it. But I don't think so.

42:30I think this is the facts will show that for the creative community, there will be more work and there's going to be higher pay because of competition, not the reverse. We're not this is not like the old industries where you are buying a competitor to reduce your output so you can increase prices. You can't do that. You have to increase output in this market because you've got to be constantly given it. And by the way, audiovisual movies, TVs is different than music. How many times do you listen to Stairway to Heaven or Metallica or whatever? You listen to it throughout your life a gazillion times.

43:08How many times are you going to watch a movie or a TV show? Unless it's the godfather. It's a whole different.

43:15Matt Belloni:When you're out pitching a show or a movie, Warner's and Paramount as separate buyers can create a market. And you're not going to let Warner's bid against Paramount if they're owned by the same company. well it's got nothing to do with that the question is are there enough competitors there where that those two will have that so yeah i get it i appreciate you coming on the show thanks for thanks for your time thanks so much matt really appreciate it thanks for having me okay that's the show for today i want to thank my guests macon delrahim producer craig horbeck artists jesse lopez and stephano sanchez and i want to thank you we'll be back tomorrow with lucas and then one more time after that Thank you.