Emergency Update: Paramount vs. Netflix - The Battle for Warner Bros. & What It Means for Licensing

Just 3 days after Netflix's historic offer, Paramount launched a stunning $108.4B hostile takeover bid for Warner Bros. Discovery—bypassing the board and going directly to shareholders. David Born breaks down the all-cash offer, the political implications, and what this means for the licensing industry.

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Transcript

This is another emergency episode of Born to License. And if you thought Saturday's news was big, buckle up. Just three days after Netflix announced they'd won Warner Bros. Discovery, Paramount has gone hostile. This morning, Paramount launched a one hundred and eight point four billion dollars all cash tender offer going directly to Warner Brothers shareholders, bypassing the board entirely. David Ellison is not backing down and this really changes everything. I'm David born and this is the update that you need to hear right now. So I should say that right now it is currently eleven thirty four a m New York time. Uh, things could evolve very quickly this afternoon. So I just want to be clear. That's the time I'm recording. This is the most up to date news that we have as of right now. Things could change very quickly. Before I dive in, just a quick disclaimer. My business works with these companies. Everything I'm sharing is based on public information and my own analysis. These are my opinions and don't necessarily reflect the views of Born to license, Born Licensing, or any affiliated companies or employees. So let's break down what's happened. Here's the facts. Paramount's offer is thirty dollars per share. All cash for the entire Warner Bros. Discovery, including the cable networks like CNN, TNT, discovery. Those are things that Netflix doesn't want. The total value of the offer one hundred and eight point four billion dollars. That's eighteen billion dollars more than the Netflix offer. Netflix's offer was twenty seven dollars seventy five cents per share. Twenty three dollars twenty five cents in cash. Four dollars fifteen Netflix stock for just the studios and streaming assets. Total value eighty two point seven billion. So here's the complication. Netflix and Warner Brothers are in exclusive negotiations now since on Friday, Warner Brothers Discovery accepted the offer. If Warner Brothers backs out to pursue Paramount, they owe Netflix a two point eight billion dollars breakup fee. The odds are that Paramount will probably pay that in one way or another anyway. If they decide to to walk out and negotiate with Paramount, and Paramount is successful. Here's what Paramount is hoping for. They're betting that Warner Brothers shareholders will force the board's hand. They're saying, look, we're offering seventeen point six billion dollars more in cash. Let the shareholders decide. Now the shareholders, let's see, because they might feel like that, the, um, the bits that Netflix doesn't want, the cable channels and so forth, TNT, CNN discovery is worth more than that gap. So let's see what they say. The other thing that's happening today is President Trump said yesterday the Netflix deal could be a problem, quote unquote, due to market share concerns. David Ellison has a close relationship with Trump. His father, Larry Ellison, is a major Trump donor. And this morning, Jared Kushner's Affinity Partners was revealed as one of Paramount's financing partners alongside Saudi, Qatari and UAE sovereign wealth funds. So this is getting very political. Now, I want you to hear directly from David Ellison this morning, he went on CNBC's squawk on the Street to make his case. Have a listen. When you look at the scale of the companies, right? Look at the scale of Netflix, three hundred and ten million global subscribers. When you combine the number one streamer with the number three streamer that creates a company that has unprecedented market power north of four hundred million subscribers, the next largest competitor is Disney, with just under two hundred million. That's bad for Hollywood. That's bad for the creative community. That's bad for consumers. And look at how the market is reacting to this deal. We are literally seeing talent talking about the death of movie theaters. We've all heard Ted Sarandos comments about how he feels about the theatrical experience. And you've also seen, you know, and our deal is also offering more cash for shareholders. Okay. So very importantly, because I know there's a lot of people talking about this, I need to talk about what does this mean for licensing? That's my big focus here. I want those listening to understand what impact this has to the licensing industry. On Saturday, on my special emergency podcast, I laid out why Netflix, in my opinion, was the best of the three options Paramount, NBC universal, and Netflix. I stand by that from a licensing perspective. But here's the reality if Paramount wins, we're looking at massive consolidation. One company could own SpongeBob SquarePants and Looney Tunes, Mission Impossible and Harry Potter, Yellowstone and friends Emily in Paris and The Big Bang Theory, Paw Patrol and Scooby-Doo, South Park and DC superheroes, and thousands of more properties. That's an enormous amount of power concentrated in one place. And as I said on Saturday, when this happens, properties get deprioritized. We saw it with Disney, Fox, The Simpsons, Ice Age. Once licensing juggernauts now really getting less attention from a Hollywood perspective, Paramount might be better in my opinion, Alison told CNBC this morning. You heard him that the Netflix deal would spell the death of the theatrical movie business. I don't think he's wrong. Netflix is anti-theatrical. Warner Brothers represents twenty five percent of studio output in American cinemas. If Netflix takes over, I don't see these films staying in theaters long term. But from a licensing perspective, I think Netflix has more capacity to manage the portfolio than Paramount, who already has their hands full. That said, the best scenario really for licensing is that none of these companies are successful. A buyer who doesn't already own a massive IP portfolio, someone who can give the Warner Brothers brands the attention they deserve without competing priorities. That's who we need to take on the Warner Brothers portfolio. So what happens next? Well, this is now a very public battle. Paramount has launched a website, Stronger Hollywood.com, to make their case directly to shareholders. They were working hard over the weekend to get this strategy sorted. Netflix could counter with a higher bid. Trump could intervene. Regulators in the US and the EU could scrutinize both deals. The timeline we're still looking at twelve to eighteen months. So, uh, we I know that things are changing very quickly, and I'm talking very quickly now because of that. I'm very excited about all of this news. If a deal even survives this hostile bid phase. We have that twelve to eighteen months of regulatory review. The stock market reaction today Warner Bros. Brothers discovery. Shares are up. Paramount up, Netflix down. Not sure what that says. There might be some other factors, but that's very interesting. And for licensees, if you're a licensee listening to this, who has a Warner Brothers license, a Netflix license, a Paramount license, business as usual, don't panic. Even if this goes through transitions take years. Keep renewing your contracts. Keep working with your current partners. They're all great teams. Keep going. These big, massive changes that are happening as we speak. It'll take a while to hit the licensing industry in the long term, so please just keep working hard and doing your great work. This is certainly going to get messier before it gets clearer. All right, I will try and keep you updated as this unfolds. Keep watching on LinkedIn on Instagram. If you haven't joined me on there yet. If you haven't listened to Saturday's episode, go back and listen. It has the full breakdown of why this matters for licensing. Thanks for tuning in. This is David Bourne and you're listening to Bourne to License.