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BREAKING NEWS: Netflix x WBD · The Media Odyssey

• Marion Ranchet: [00:00:00] There's never a dull day. This industry an insane. So we're Friday, what are we, 5th of December. We recorded an episode last night where we're wrapping 2025 and we were talking about M&A. We were talking about who's gonna get Warner Bros. And today we get the news. Evan Shapiro: Yeah, it broke last night overnight. Lucas Shaw broke it, and it's that, I'm gonna put this in correct terms. Warner Brothers Discovery has chosen the bid from Netflix as the winning bid to acquire, not the entire company Marion Ranchet: Yeah. Evan Shapiro: But the streaming division and the studio division only, not the linear [00:01:00] networks division. And yeah, it's breathless news that came through. It also comes on the back of a very interesting day in this story, yesterday, David Ellison, AKA, the nepo Prince demonstrated what a spoiled brat he actually is by sending a public letter to David Zaslav and the board of WBD saying he didn't believe the process was be, was running fairly. Marion Ranchet: Oh wow. Evan Shapiro: And he said he basically clearly got an indication that he hadn't won that. In retrospect, this is clear what happened. Someone called him to inform him that Netflix had been chosen as the winner and that they were gonna announce it shortly. And in response to that, this spoiled brat, like throwing a tantrum in the sandbox, in the playground said, I don't like this. And literally the letter says, I don't believe you're running this process fairly. To which the [00:02:00] board replied, that's bullshit. Openly, like they're pissing at each other. Then this morning there was a really fascinating piece in my favorite newsletter that isn't one of ours, status by Oliver Darcy, which detailed a pissing match between Nepo Prince Ellison and the chief officer of failing up David Zaslav over South Park and them having a deal, a billion dollar deal for HBO Max to continue to license South Park non exclusively by the way that in this new deal and that Ellison shook hands on the deal and then rescinded the deal and tried to renegotiate everything and that pissed Zaslav off and they got into basically a pissing match, and what Darcy was saying is this is now producing itself in the bidding [00:03:00] process for Warner Brothers Discovery because Zaslav is basically saying, fuck you to Ellison. Probably in part due to this argument they got into. And then Ellison writing this really embarrassing, like in the hi history of corporate correspondence, probably the most embarrassing letter I've ever read out loud or seen. So yeah, that's where we are. And now we are in a position where ostensibly and I use that term carefully, Warner Brothers Discovery has chosen Netflix as the winner, and now that deal has to be approved by the shareholders and by, and this is where the difficulty comes into play, regulators. Marion Ranchet: Yeah. And the thing that I will say is, besides maybe any mishaps between, Ellison and Zaslav we spoke to about that, right? And the fact that this was a great deal. Like financially speaking it's the best offer, right? [00:04:00] Evan Shapiro: As a shareholder, it's probably the best offer 'cause it's all in cash, which is what David Zaslav loves more than anything, including probably his children. And then that's not fair. He probably loves his children. But he loves cash just as much. And actually in, on the, on behalf of the consumers, there's been a lot of chatter about how this will allow Netflix to raise prices. I don't think that's, I don't think that will work. I think people will cancel before they pay Netflix more. But in, in the, from the perspective of the consumer not having to pay for both HBO Max and Netflix, that's gonna save me money. And so I, I think this is, of the offers likely the best offer on paper. I just don't think, and here's the complication. I don't think it'll get approved. I don't think there's any way in hell this deal gets approved by the people who have to approve it, which is the Attorney General of the United States of America who's incredibly corrupt. The Attorney [00:05:00] general of the state of California who isn't corrupt and does not like this deal. And there's numerous reasons why the Attorney General of California does not like this deal. And then there's members of Congress who have already started attacking Netflix over this deal. Marion Ranchet: It's mostly for political reason, right? That they would reject that. Because if you look at this deal from a competition law standpoint. It feels like it's raising less question than Paramount Plus or Comcast. Evan Shapiro: Certainly less than Paramount or Comcast would because both Paramount and Comcast own studios, so this would basically leave one less studio on the planet Earth. But the Attorney General of the state of California is against the deal because they believe that it will limit the amount of content produced and sold in the state of California in particular, which is why they care about this, [00:06:00] that it's going to have a deleterious effect on the industry itself in California, which is already a shit show, struggling disaster. And you can see where the governor and Attorney General of California have the non-political reasons. For votes maybe. As opposed to Pam Bondy, who is the most corrupt attorney general in the history of the United States, which is a very high bar, and members of Congress who are also sycophants of the current president, who know that he wants the Ellisons to get this deal. So they, those are definitely political reasons. The Governor and Attorney General of California have Marion Ranchet: less so, okay. Evan Shapiro: I think they're looking out for the taxpayers of their state. And but you're gonna get, so that means you're gonna get attacked from both sides of the political spectrum if you're Marion Ranchet: for different reasons. Evan Shapiro: Yeah. Marion Ranchet: So you know this thing about having less outcome for the creative communities, you have that as well with Paramount plus Warner. [00:07:00] That's, so that's what I don't really necessarily get. I would say even more so. Evan Shapiro: I think that deal, I think that deal would be harder fought by the same people in California. And then what you have on the other side is Elizabeth Warren and other members of Congress saying this is clearly against the concept of antitrust, which it absolutely is by the way, there, there is no way that a Paramount acquisition of all of Warner Brothers discovery would ever be approved in any other administration in the history of the United States. It would never get approved, by the way, neither would probably a Comcast. So all three are problematic, which is why they, none of them really make all that much sense. Warner Bros. Discovery and Netflix combined makes the most sense. But that's saying I'm the tallest Jew. I'm definitely not. It's just okay, I guess if this is the only one you have in the room. Okay, fine. It's the best of the worst outcomes. In reality, it's what would be [00:08:00] best for the shareholders and employees of Warner Brothers Discovery is if Apple bought them and invested billions of Marion Ranchet: Oh you and Apple, Stop it. Stop it. Evan Shapiro: Because they have no overlap there. Marion Ranchet: I know, but they've spent so much money on the F1 for nothing. They are clearly not in the business of expanding the library. They don't wanna do that. Otherwise they would've placed a bid. Evan Shapiro: We'll see. Tim Cook is about to be replaced. Finally, they are doing a search for CEO and I think that company completely changes his outlook with a different CEO on board. What if Ted Sarandos gets made CEO of Apple? I, would you change your mind then? That's, that could happen. Ted Sarandos is definitely near the top of the list of people. I'm not on the top of the list, but Ted Sarandos would absolutely be on my short list of potential CEOs. Marion Ranchet: It's, I think it's a lip I know, love, all the love for Ted, I'm sorry, running Apple, running Netflix. Not the same thing. Same thing. Evan Shapiro: Very different jobs. Absolutely. Marion Ranchet: [00:09:00] And this thing saying that Netflix is a technology company. It's to some extent, but just within entertainment. This is such a small business. Evan Shapiro: Yeah. Ted, I mean Ted's never done anything like that. Yeah. Yeah. Marion Ranchet: And especially at a time where, you know, you we've said it right? Apple Services business, it is becoming a bigger portion of the overall Evan Shapiro: All the more reason someone, all the more reason I get that someone with Ted's profile makes or Iger's profile or someone like, yeah, Marion Ranchet: You still need to get the rest of the business going. And I think he has no experience doing that, but Evan Shapiro: We're getting off track. Yeah. Marion Ranchet: We're getting off track completely. But, so no. One thing that I will say is what I'm seeing from my side of the ocean is like the timing is horrendous. Earlier this week, Warner Bros Discovery announced and gave the exact launch dates for HBO Max in Italy and in Germany with the UK following. So essentially within Q1 of next year. [00:10:00] It is launched and it's long overdue. Because we've spoken about that at length. Evan Shapiro: Yeah, they waited way, way too long to launch. Marion Ranchet: Because HBO was focused on its historical channel. Yeah. Yeah. Output deal business with Sky. But oh my God, the timing, all of these people will have spent this entire year working towards that launch that actually explained why Clément Schwebig next year is moving to RTL. I think he was like, I don't wanna be I don't wanna be near this. Go get, Evan Shapiro: I wanna get outta this mess. Marion Ranchet: Yeah. Lemme get a job somewhere else. The other thing is the impact on the studio business and the overall theatrical business. And the first few words from Ted, let me quote Ted, on that conference call, are not reassuring. Essentially he's saying that, it's gonna evolve, the theatrical window is gonna evolve, it's gonna be consumer friendly. What do you mean by that? What he means by that, of course, is that he's not gonna be running the [00:11:00] WBD business the way it was run. I, or if he does, he'll do it the first 12 months and then as soon as he can, he will grab, this is why they're spending so much money, right? They need HBO. And I think it's a nice addition. Potentially it's, you acquire a few new subs. I think it acts as, a great retention tool. Evan Shapiro: Mostly IP. Marion Ranchet: Yeah, but it's the IP, right? The IP within HBO and all of those movie IPs. Because I also, I think something movies. Evan Shapiro: Something that people keep sleeping on is, I also think it's a major advertising move. I think there, there's a whole aspect of their business that they just can't get off the ground that this helps with. Marion Ranchet: How so? Evan Shapiro: Just more content, the more content to put ads in, an ad sales division that actually sells advertising as opposed to holds guns to people's heads, although they're not that great at it. Marion Ranchet: The legacy linear business is good as ad sales, but this will not be part [00:12:00] of this deal. If you look at HBO Max, right? Yeah. Evan Shapiro: Their ad load is very low. Marion Ranchet: That, and in a lot of markets, they're making deals with others to help them do the sale, the Sky. Evan Shapiro: But you're, if you're getting the HGTV content and the Discovery Networks content as part of this which is, it's a good question. I don't, it's hard to understand how you separate Discovery from HBO Max. But let's say you just getting a shit ton of content. That's the thing that they have not enough. What would, I would call, HGTV type content, frankly. That stuff just is a, it just, you can watch 10,000 hours of it in a row and never get bored with it if you love house flipping or you love food shows. This is a thing that, that really works. But I think I, this is where I really disagree with you. You don't buy the Batman franchise to put it on streaming directly. There's just, there's no scenario. Say again? Marion Ranchet: I hope not. Evan Shapiro: I just, it doesn't make [00:13:00] financial sense. There's just so much money that's generated by the theatrical window of the superhero continuum that it makes absolutely no sense to start putting that stuff directly to streaming. You can get your window here. I've watched Batman a hundred times. I saw it in the movie theaters. I watch it on HBO Max, I watch it when it's on regular television. Like I just, Marion Ranchet; I do that too. Evan Shapiro: Continue to watch it. I watch Wonder Woman over and over again. I like, I love those movies and I am not alone in that. So every window makes the money and then there's all the merchandise sales that goes along with that is really bolstered by that first theatrical window. So I think Ted becomes a different kind of executive when he gets a real movie studio to run. Which is I think, part of the attraction for him to be blunt. On one hand, like this makes a lot of sense for Netflix. On the other hand, this is a big fucking pain in the ass. Like Ted Sarandos is gonna have to haul his ass to DC and [00:14:00] Sacramento and testify in front of houses of Congress and houses of legislator over and over. This is gonna be the next year of his life. This is the equivalent of getting a divorce and having lots of kids like this is the inverse of it, but it's gonna, yeah. Soak up so much time, energy, bandwidth, and money. Think about the lawyers. They've guaranteed a breakup fee. If this deal doesn't go through, they have to pay a huge breakup fee. So this is a lot of mashagas for Ted Sarandos and Netflix to go through, and I just feel like they're not doing this because they want to rip apart the business. I think there's a, there are other things at play and I think Ted wants to run a movie studio. I think that's part of it is, Hey, what if we did have a viable movie division? If you look at the last year in Warner Brothers, they had a, an amazing theatrical year. Their theatrical business is [00:15:00] the best part of their business right now. Weapons, Barbie, like they've had a monster couple of years. Marion Ranchet: It's been a couple of years with Barbie, but yeah. No, I agree. Evan Shapiro: But every year they've had some real big wins in the theatrical business. Sinners were very And some surprise Marion Ranchet:Yeah. Yeah. Sinner was, I was thinking about Sinners earlier this year, which I could not watch. I'm scared easy, but it's a very scary, so to this point about that means that they would then keep the big IP, and I think that's even worse for the rest of the creative community. Because that means that any tier two, tier three movies, straight to streaming, Evan Shapiro: If at best if they get made at all. Yeah. No, this is terrible for independent film. Marion Ranchet: Exactly. Evan Shapiro: This is not a great, you're not gonna be able to get smaller movies made anymore unless you truly do what we did with skit, which is make it yourself and figure out self [00:16:00] distribution. But no, this Hollywood has become with this deal when it closes, if it ever closes, by the way, look, I'll get to that thought in a second. This is the end of this be, this is now the birth of the monoculture of Hollywood Society. They, it is all four quadrant stuff all the time. We're talking about McDonald's and Velvita cheese, 365 for the rest of this decade and moving forward. That said, I don't think this deal closes. If it closes. I think we're, we'll be talking about this deal closing this time next year. Marion Ranchet: Yeah. Evan Shapiro: So actually at the serious, if it ever closes. Marion Ranchet: Yeah, I, we gotta thank them, right? That's this is gold for our 'cause. We just, Evan Shapiro: It's great. Marion Ranchet: We've just done our 2025 grading exercise and we're gonna be doing next week. 2026 prediction. Oh my God, this is gold. This could be an entire article on just that, all the hypothesis [00:17:00] and I've seen, oh, I don't know about you, but I've been quiet on that. I only say something if I really have something to say, which Evan Shapiro: On this merger? Marion Ranchet: We're doing right now, but everyone has been sharing this news. This is LinkedIn was hijacked by this news today. Evan Shapiro: I started getting pings last night, and so I, I wrote a long piece on this on LinkedIn today, and then I posted it on my Substack as well. But there were people who were like when is Evan Shapiro waiting about this? Also everyone's now beginning to ask what's, so if Disco Bros goes away, what's the new name of this entity? Marion Ranchet: No. What are you gonna do? What are you gonna do? Disco Bros. So what could it be? Evan Shapiro: It's a good question. I think if it's Warner Brothers. It's if Discovery's taken out of it and it's Warner Brothers and Netflix, I guess it's like Flixbros. Marion Ranchet: My goods Evan Shapiro: Net bros. Marion Ranchet: Ew. You sound like a boomer [00:18:00] this time I can say it. Oh my goodness. Evan Shapiro: There no, there's no good name. WBN. Marion Ranchet: Do you wanna mention Blockbuster or something from 30 years ago? Blockbuster. It's Blockbuster. Evan Shapiro: That's actually a good name. It's available. And by the way, this is, oh my goodness. This is a good way to bring this round trip. Blockbuster was offered the opportunity to buy Netflix for I don't know, like a billion dollars early on in the goings on. And they turned it down. And now Blockbuster, there's one blockbuster left in North America. Believe it's in, Marion Ranchet: It's a museum, no? Evan Shapiro: it's in Alaska, actually. Marion Ranchet: Interesting. Evan Shapiro: And yeah, and I think this is a great way to bring back that name. I think the perfect name for the marriage. That's it. That's it. I'm where I'm gone. Marion Ranchet: Oh, I found it. Yes. Evan Shapiro: The perfect name. The perfect name. I'm, I'll not give you any credit. The perfect name Marion Ranchet: What? No, no, no. Evan Shapiro: The perfect name is Marion Ranchet: Everyone is a witness, you're not gonna do that? Evan Shapiro: No, we'll not be, we'll not be Marion Ranchet: Copyrights. This episode specifically, so I can, Marion Ranchet: Marion Ranchet, Blockbuster, Evan Shapiro: That's the name. Blockbuster Marion Ranchet: Net Bros. Evan Shapiro: Because they're not gonna do anything but Blockbusters. That's the [00:19:00] thesis is this is a blockbuster only business. This is not about making little tiny shows anymore. Marion Ranchet: Of course. That was fun. Maybe we can go back to our lives now. Impromptu episode. Evan Shapiro: whatever we wake up thinking that morning, we'll do an episode that day. Marion Ranchet: Oh, let's do that and make our producers miserable. Yes. Evan Shapiro: Okay. It was good to see you on a non-scheduled podcast recording. Marion Ranchet: Good to see you too. Evan Shapiro: We're gonna drop this episode now, but please do check out our year end wrap up episode. We've also got a really good episode coming up with the executive producer of Frontline. And talking about Frontline's YouTube strategy, and then we'll have our predictions episode after that.