Who gets to buy Warner Bros Discovery?

Rob Armstrong (0:06)

Pushkin. Nothing gets Wall Street and Wall Street journalists pumped up like a good old-fashioned money fight, and we have a doozy going on right now. The target is Warner Bros. Discovery. The contenders are Netflix and Paramount. Today on the show, the future of entertainment and the dynamics of deal making. This is Unhedged, the markets and finance podcast from the Financial Times. And Pushkin, I am Rob Armstrong, coming to you from a frigidly cold New York City. And I am joined by the Butch Cassidy and Sundance Kid of Deal Journalism, James, or possibly the Statler and Waldorf.

Oliver Barnes (0:56)

Daskin Hutch. Which one of those is a Warner asset? That's the only thing that matters.

Rob Armstrong (1:02)

James Fontanella-Khan is the US. Financial Editor of the Financial Times. And the Sundance Kid is our US. Deal Editor, Oliver Barnes.

Oliver Barnes (1:13)

Deal Correspondent.

Rob Armstrong (1:14)

Deal?

Oliver Barnes (1:15)

Oh, God, I forgot.

Rob Armstrong (1:17)

I was trying to promote you there.

James Fontanella-Khan (1:18)

Can I be Deal's Editor? It's up for grabs.

Oliver Barnes (1:20)

Maybe after this.

Rob Armstrong (1:22)

OK. This is one of these shows where there's so much to talk about, that the hard thing is what we're going to leave out. But this all culminated on Monday with this Hostile Bid. But let's go back to the beginning. Where did the whole saga of who gets to buy Warner Discovery begin?

Oliver Barnes (1:41)

Yeah. Where does the lineage of this all start? I mean, it's a kind of it's a plot fit for Hollywood, isn't it? David Zaslav, who's this kind of larger than life figure in Hollywood. He's the Warner Discovery CEO. He creates Warner Discovery by kind of merging his less sexy cable company Discovery into this storied movie studio, Warner Bros. a few years ago. And that company underperforms. And then Zaslav hatches a plan to break up that company and spin off the cable assets, the CNNs of the world, the Discovery, Animal Planet, I don't know if you've watched any of those.

Rob Armstrong (2:21)

These are wasting assets.

Oliver Barnes (2:22)

Exactly. To break those apart from the studio asset, which is behind, you know, Harry Potter and the DC Comics franchise and the streaming service HBO Max.

Rob Armstrong (2:33)

I'm a subscriber. So am I. And I like it.

James Fontanella-Khan (2:36)

So am I.

Rob Armstrong (2:36)

Yeah, yeah.

Oliver Barnes (2:38)

Very good. And also, you know, pretty affordable.

Rob Armstrong (2:40)

And just, I'm going to make you pause there. Let me, I just want to set some financial context for our listeners. So over the last six months, Warner Bros. Discovery is up 190 percent. Would you care to guess what it is up over five years? Three percent. Right. So this is the, it's interesting.

Oliver Barnes (3:01)

That's value creation, right?

Rob Armstrong (3:02)

Until there was a dogfight over this asset.

Oliver Barnes (3:05)

Yeah.

Rob Armstrong (3:05)

It was a struggling stock.

Oliver Barnes (3:07)

Yeah.

Rob Armstrong (3:07)

Which is kind of interesting.

Oliver Barnes (3:08)

And that was the genus of the breakup. And the breakup took on like different forms. And I think initially he was going to spin the studio and streaming assets off. And then it reversed.

Rob Armstrong (3:18)

The good stuff was going to go.

Oliver Barnes (3:19)

And then it was getting rid of the less sexy assets. But then, simultaneous to this...

Rob Armstrong (3:26)

This is sort of this summer that the breakup is happening.

Oliver Barnes (3:29)

Yeah, the breakup was officially announced over summer. Simultaneous to this, you have another kind of theme and story unfolding in Hollywood, which is that the Ellison family, Larry Ellison, the founder of Oracle, one of the world's richest men. I think he was the world's rich man. Maybe it's changed in the last few...

Rob Armstrong (3:46)

It was the vassalations of the stock market determined.

Oliver Barnes (3:48)

And his son, David Ellison, are going and building a new Hollywood powerhouse. They've merged together Skydance, the company that they created, didn't they?

James Fontanella-Khan (4:00)

Well, it was David's company, their production company, behind Mission Impossible and a bunch of other...

Oliver Barnes (4:04)

They merged that with Paramount, again, one of the storied Hollywood movie studios. But Paramount's small, and they're the Ellisons, and they've got big ambitions. So they're looking at what's going on with Warner, and they're like, this is a neat fit for our mouse eating this elephant, for us growing into a bigger size movie studio.

Rob Armstrong (4:26)

Mouse that roared, if you will, yeah.

Oliver Barnes (4:27)