Media Monday: Zaz’s Parachute & Skydance Looming Questions

Jon Kelly (0:01)

I don't know if it's a strategy so much as its reaction to other things that are in the market, but we are totally, I mean, I predicted this, we're totally seeing the hauling out of these entertainment budgets.

Peter Hamby (0:14)

Welcome to The Powers That Be Daily, Pucks podcast focused on the intersection of Wall Street, Washington, Silicon Valley, and Hollywood and the players who run it all. I'm Peter Hamby. It's Monday, October 12th, which means it's Media Monday. Today, Jon Kelly and I discussed what's next at Skydance, and what's on the chopping block as David Ellison begins his journey as a newly minted media mogul.

Will Ellison invest in premium shows or reality television? How does he position Paramount Plus against the other streamers? How do CNN and CBS News figure out how to work together? As a Paramount Warner Brothers postscript, we also ask, is David Zaslav a Hollywood villain? We'll discuss all that and much more on today's episode of The Powers That Be.

Happy Monday, everybody, and welcome to The Powers That Be. I'm joined today by my colleague, Jon Kelly. It's Media Monday, of course. There are a lot of angles to the newly formed media Hollywood giant Skydance. We've got personnel, we've got what kind of investments they're going to make. Will Paramount and Warner Brothers compete against each other in the studio space? We've got sports rights, we've got CBS, CNN. There's so much to discuss. Hopefully, there's something interesting there for you. Jon, first, I want to start. Do you notice if you're watching on YouTube, my frayed LSU hat that's like 10 years old? Yeah.

Jon Kelly (1:47)

I was going to bring that up. Were you... Is that an oldie but a goodie, Peter?

Peter Hamby (1:53)

It's an oldie but a goodie. I don't know where you grew up in the West Village if these things were popular, but it was cool to have a frayed hat in the 90s.

Jon Kelly (2:04)

Maybe in Richland, yeah.

Peter Hamby (2:06)

And GQ just reported that the ripped hat look is back. We need Lauren and Malik to confirm this. Malik would never wear a hat like this, but I just wanted to bust out one of my frayed hats.

Jon Kelly (2:19)

It's funny, Peter, the worst of the 90s has come back.

These awful pale jeans and everything doesn't fit anymore. These stupid hats you're wearing. It's very funny how these boxy suits for men.

Peter Hamby (2:40)

We'll change the subject.

Jon Kelly (2:42)

I know we're boring everybody.

Peter Hamby (2:44)

Hey, let's start with Skydance. Bellamy led his most recent dispatch with David Zaslav, of course. Zaslav, last week, cashed out $606 million worth of Warner Brothers Discovery stock thanks to the sale of Skydance. Bellamy writes, full super villain.

If, say, 5,000 people are about to get fired thanks to that sale, Zaslav's pre-tax windfall would have provided $120,000 in cash to each one of them. That's not how it works in our society. But this is what he always wanted, wasn't it?

Jon Kelly (3:24)

I also laughed when I read the draft of that, too. That was pure mad. Mad is doing incredible work on this deal. We should mention, obviously, Redbird, investor in Skydance, investor in Buck. Zaz, an investor in Buck, de minimis, at least for a little bit longer.

There is no good answer to this, Peter, right?

This is one of the details that has really cast a nasty storm cloud over the deal. Zaz is not the founder of Discovery Communications. He had a long run at what was then GE, but he was effectively equitized almost as a founder. When you think about how Discovery was built, now obviously it wasn't built to last, right? It grew through a number of deals that were very unsexy like scripts, and then a couple, one that sure was in the form of the Warner media assets. The thing that drives people crazy is that Zaz's economics were revised in the middle of his tenure so that he could be in the money.

We all know the story about Warner Brothers Discovery, and actually Rich Greenfield did a great job discussing this on the town. They thought that they were making 12 billion in EBITDA, they thought they were going to get to 14, they ended up going down to 9 The leverage killed them, they started in the 50s, down to the 30s, and Zaz's stock was underwater. And the board at some point realized that the only way that this skipper was going to get them out of this hurricane was if they effectively reissued stock, lower the strike price, put them in the money so that he could have this huge windfall. And guess what? The guy did, and I do agree with our partner Bill in this regard, he pulled off an extraordinary auction.