Why Paramount Should Beat Netflix | TCAF 222

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Ladies and gentlemen, welcome to the final Compound and Friends of the Year. It's the last one.

Yes, this the last one we're doing. It

is. Oh, we got a great show today. I'm

super excited about today's show. Uh we

have here legendary former investment banker, current journalist Bill Cohen. Bill is the founding partner of Puck, a best-selling

author most recently of the book Our Failure. Bill is also a contributor to

Failure. Bill is also a contributor to the New York Times, Air Mail, Financial Times, Town and Country, so many other publications, and uh if you're a reader

of Puck, you probably are reading something that Bill has found out every single day of the week at this point. It

feels like Bill, thank you so much for joining us. We appreciate it. Thank you,

joining us. We appreciate it. Thank you,

Josh. Thank you, thank you for having me. Great to be back here,

me. Great to be back here, >> of course. And uh you're remote and just to let the viewers and listeners know that is because you don't like us that much. You like us enough to pop on

much. You like us enough to pop on Streamyard. You don't love us, but also

Streamyard. You don't love us, but also there might be a CO situation. So

>> yeah, I I really would have thought we were done with CO, but my my wife got it the other day and of course surprised she gave it to me and we both had

vaccines in September, but mine's a mild case. I'm on tax lo. This is too much

case. I'm on tax lo. This is too much information I know and I don't even real I did not want to share it with you guys in the studio.

>> Co is like the uh the Avatar movies will never actually be done with them.

>> It's Michael Myers >> will never be finished. All right. Uh

Netflix versus Paramount uh to acquire Warner Brothers. Um if and when this

Warner Brothers. Um if and when this thing happens, it will be one of the largest not just media mergers of all time. It's up there on the list. It's a

time. It's up there on the list. It's a

very big dollar amount and there's a lot at stake here for the future of not just the companies themselves, but for the consumers, for pro sports, for

Hollywood, for box office versus streaming, uh, for for pretty much every aspect of entertainment is in play here.

Do you do you view it that way? It's as

big a story as I'm building it up to be.

>> Well, I mean, look, it's a big M&A deal.

So from my perspective, from a Wall Street perspective, it's a it's a big deal. You know, my partners like Matt

deal. You know, my partners like Matt Belly or Julia Alexander or Dylan Buyers probably are better at assessing sort of the Hollywood impact of this or the impact it's going to have on consumers.

You know, I don't know whether, you know, they might say, "Oh, you know, Netflix costs you, you know, $15 a month and and HBO cost you $20 a month, so

we'll give you both for, you know, for $30 a month instead of 35." I mean, they might do that or they might say, "Oh, we'll give them both to you for $40 a month." I don't know what they're going

month." I don't know what they're going to do, but uh, you know, I'll let them think about that. I am just like laser focused on this deal and the aspects of the deal.

and uh you know who who might win and where we are now and where it's going and and you know to me it's riveting.

I'm just I'm loving it.

>> Me too. There are the personalities that that are at the center of this of course Zaz being a big part of this and the fortune that he's going to make whichever deal happens he's going to do

very well for himself. Um could could Warner the studio streamer and the linear network survive? like was this was the debt too much for them that they

had to get a lifeline that they are now going to get from either Netflix or Paramount?

>> Look, I mean we can talk about whether or not Zaz should have done the deal in the first place and the terms under which he had to do the deal which was the had to take on $55 billion of debt.

Uh most of which came from AT&T. That's

a oh man that is a lot of debt. Uh, and

but you know, Zaz's incentive, one of the reasons he's gotten paid so much and will continue to get paid a ton if this uh uh gets completed, which clearly

looks like somebody's going to buy it.

So, um, you know, he he was his incentives, he was his reward was to pay down this debt. So, I always viewed this as sort of a publicly traded LBO that as

soon as this debt got paid down sufficiently and and you know, he's gotten it down to a net debt of $30 billion from 55. I mean, that's pretty >> significant. That's not nothing. Uh I

>> significant. That's not nothing. Uh I

always figured that the equity would pop. Uh just like, you know, even after

pop. Uh just like, you know, even after being stagnant for every forever and all the other research analysts saying, "Forget it. it's a it's dead money and

"Forget it. it's a it's dead money and it's never going to work and every you know everybody has sort of running away from this thing. I figured that as soon as that debt got paid down maybe as soon

as that you know if they got a a credit upgrade this thing would zoom. I think

they did pay down a lot of the debt but then this this process took over and literally since then the stock has gone from like you know this summer from

seven and a quarter to 30 bucks a share.

So, it's definitely been one of the better uh performing stocks of the year.

Uh mostly probably because of this takeover process. But, you know, Zaz did get this

process. But, you know, Zaz did get this in a position to where it's uh quite desirable and that's why there are two serious suitors uh who want to acquire it.

>> When this was a singledigit stock and it was still high40s billion dollars in debt, um I remember the narrative. So,

let's say this is like late 2023. The

narrative was that there was some regulatory reason why they couldn't do a deal and then that was going to come off roughly around the same time that

potentially we would have a change in the White House. Lena Khan would be gone at the FTC and there would be a higher likelihood that a deal could actually

happen. So, that sort of took the stock

happen. So, that sort of took the stock from the single digits to let's say the low teens. And then a lot of dominoes

low teens. And then a lot of dominoes fell the right way and then all of a sudden um Trump comes in and he's not a huge fan obviously of all of the things

that are happening on these news networks. So it's not a slam dunk that

networks. So it's not a slam dunk that he's going to approve a deal unless the suitor is somebody that is Trump friendly or or MAGA world adjacent or

something and then Ellison compl uh David Ellison consummates his deal. They

now control Paramount, the most likely merger candidate. And it just all seems

merger candidate. And it just all seems like it's going to go according to this script and everybody understands that the Ellison's are friendly with the Trumps and they're willing to play ball.

Look at what they had to do to get the CBS Viacom thing done. But then all of a sudden there's like a monkey wrench and it looks like there it turns out there's another suitor. Was that like a bolt

another suitor. Was that like a bolt from the blue when when you saw that happen? Um did you have any heads up

happen? Um did you have any heads up whatsoever that that could happen? What

was your reaction to the Netflix uh proposition or the news that they were even talking?

>> Well, I mean, I've been hearing uh from my sources that that it was more than just Paramount that was interested in this. I don't think many people

in this. I don't think many people believed that. Not sure Paramount

believed that. Not sure Paramount believed it, but I was hearing absolutely that that Comcast was interested. I mean, I've been talking

interested. I mean, I've been talking about Comcast, NBCU merging with WBD, you know, for a year and a half now. Uh,

picking up on what Tom Rogers uh was, you know, first started talking about.

Um, I'd heard uh so my sources were telling me >> Comcast, Netflix, maybe even uh Amazon, uh to a lesser extent, potentially

Apple. Uh so I mean I I was certainly

Apple. Uh so I mean I I was certainly expecting there to be more than uh just paramount. Uh I am you know and and I

paramount. Uh I am you know and and I figured look you got to remember uh Josh this started back in June. Essentially

Zaz put this into play in after after April and you referenced this technical issue after the technical issue was that you had to wait two years uh after a reverse Morris trust deal for there to

be no tax implications of a subsequent sale. So that was that ended in April,

sale. So that was that ended in April, >> right? So that was a April you know of

>> right? So that was a April you know of this year. And so uh that uh you know

this year. And so uh that uh you know and then in June they decided they were going to split the company up into two pieces and that essentially put put the

company into play. Zaz uh recut his options at that point to uh you know give him some incentive to get a deal done and then the Paramount deal closed in August. Literally two weeks later

in August. Literally two weeks later they reach out to Zaz and say you know we're interested in quiring WBD. So um

you know I began then beginning to hearing well you know it's more than just paramount here. I know they don't necessarily want to believe it but it's true and uh then it came out to be that

in fact uh there was Netflix in a serious way. Comcast less so because

serious way. Comcast less so because they've got you know uh more problems than they usually have when there's a big deal uh you know floating around to be done. So they made a bid uh but it

be done. So they made a bid uh but it was they dropped out relatively quickly.

So now we're basically at this two-horse race with Netflix definitely leading, but it's not over yet.

>> What is the shareholder vote?

>> Okay, they haven't set a shareholder vote yet, and it's going to be uh after uh WDBD produces the proxy statement for the Netflix deal, which is, you know, signed

merger agreement. And that's not going

merger agreement. And that's not going to be, according to the uh chairman of uh WBD speaking on uh CNBC yesterday, that's not going to be until quote late

spring, early summer. So,

>> oh my god.

>> Yeah. So, this is what >> but I mean that doesn't mean look it could that whole timeline could get completely disrupted if if Paramount

raises its uh $30 a share bid. So other

than other than the index funds, Vanguard, Black Rockcks of the world, which are the end investors, who are the big parties at play that are going to be influential in determining what the shareholders ultimately end up doing at Warner Brothers?

>> Well, clear clearly the Warner I mean there are a lot of arbitrageers now in the in the WBD stock and it's it's not even clear whether those index funds are still in it anymore. You know, we you

know, we haven't seen a recent filing about who who owns the stock. So, uh,

but clearly it's moved into the hands of the ARBs. And the ARBs are short-term.

the ARBs. And the ARBs are short-term.

You know, we haven't had a good M&A arbitrage, uh, opportunity in in years like this. And

like this. And >> with a with a hostile suitor, it almost never happened.

>> It's got it all. It's I mean, I I I look back and it seems like it was not since 2000 when u American Home Products and Warner Lambert had a deal that was broken up by Fizer. So, I mean, you

know, that's 25 years ago. So, this is a this is a this is a great one. This one

has it all and I'm loving it and the arbs are loving it because you know the stock is basically only going to go one direction from here. Um

>> who makes the movie Bill about this? Is

it is it Peacock?

>> It's got to be a third party.

>> Yeah, got to be. Or or maybe they have like a roller coaster ride at uh at the at the WB at the uh Comcast uh whatever it is their their uh uh theme park that

they have. Universal theme park, right,

they have. Universal theme park, right, >> Bill? What did the Netflix executives

>> Bill? What did the Netflix executives who visited the White House have to say to Trump world in order to I'm not saying they got like a a wink or a green light but like clearly they were very

comfortable. Um

comfortable. Um >> they remain Josh very very comfortable and they repeated it again yesterday.

They remain very very comfortable with their you know regulatory uh odds here.

How they feel the regulatory process is going to go. Paramount feels like they're very comfortable with their regulatory odds. I mean, why the heck is

regulatory odds. I mean, why the heck is the president of the United States putting his thumb on the scale of either one of these deals? It should be relegated to their agencies or the

Justice Department. It should not be uh

Justice Department. It should not be uh in the uh vicinity of the Oval Office, but you know, we're dealing with a unique individual here.

>> It's the apprentice M&A. It's literally

that's what it is.

>> Totally. Where does

>> whether you know someone's fired, >> right? Where does the $5 billion breakup

>> right? Where does the $5 billion breakup fee that Netflix will owe? Where does

that number come from? I'm sure I'm sure there's some sort of formula like how does that number come about?

>> So, first of all, uh two different things here. There's a regulatory

things here. There's a regulatory breakup. In other words, if the Netflix

breakup. In other words, if the Netflix deal falls apart because of it can't get regulatory approval after any number of lawsuits and law and judges rulings,

etc., then they owe Netflix owes Warner Brothers $5.8 billion.

>> Wow.

>> Okay. If the same thing happened with Paramount, then Paramount owes Warner Brothers, if they were to go with

Paramount, $5 billion. In the meantime, there's a $2.8 billion breakup fee that Warner Brothers will owe Netflix if they

change their recommendation, the board changes its recommendation and goes with Paramount, which obviously >> Ellison would pay for that, right? like

or buyers.

>> Michael, that's a very interesting point. One of the things that is really

point. One of the things that is really pissing off WBD about the Paramount bid is they have not agreed or said they

were willing to make that breakup payment fee payment to I mean WBD has to pay that within days of switching days of switching the recommendation not when

the deal closes. days and then the question is would Paramount reimburse WBD for that in one way or another through you know a higher stock a higher bid price or whatever and they have not

agreed to do that yet. So that's one of the things that's peeving the WBD board I think.

>> Um I saw I saw I forget it was the president or somebody came out from Warner Brothers and and kind of like doubled down on like we we're doing the

Netflix deal. the board is this is what

Netflix deal. the board is this is what the board is urging shareholders to approve.

>> I'm curious uh >> that was the chairman of uh the board yesterday.

>> That was the chairman of the board.

Okay.

>> Yeah.

>> I'm curious if the timing I this is like not it's not a conspiracy theory and they're definitely there isn't definitely a connection but there might be. Oracle, which is the money behind

be. Oracle, which is the money behind the Ellison's um not maybe not on paper, but just conceptually in everyone's mind is one

of the richest men on earth. And uh

okay, Oracle's share price is an almost a 40% or 40% or worse draw down from its high. And that's coincided with these

high. And that's coincided with these conversations between Paramount and Netflix and Warner. And I'm wondering if that entered the back of anyone's mind, like maybe there's not as much money

there as we thought there was, or maybe that's not necessarily the safest bet given the fact that the old man now has some turmoil back home with with his own

share price. Or is that just like uh two

share price. Or is that just like uh two things that are not really related but look like they might be? What do What do you think?

>> I think it's I think it's the latter. I

think it's a coincidence. Um not a great one obviously, but it is a coincidence.

No, nobody has mentioned it. I haven't

heard anybody mention that. I mean, I think that's related to, you know, their AI spending and data >> has nothing to do with, right? It has

nothing to do with this.

>> So, I mean, I think if you look at it, you know, if you look at the Bloomberg billionaires index, he's still at like 350 billion,

250 billion of which is uh his Oracle is 1.16 billion share shares of Oracle stock. I think the the the so yes that

stock. I think the the the so yes that has come down but don't forget it went way up >> so I don't think it's come down as far as it went way up so I think he's still

better off this year I think his net worth is up like 75 billion plus this year so you know he's doing just fine which is of course more than you know

the 40.7 or 41 billion that they've pledged in equity for this deal I think the the bigger problem as I've been writing about is that for whatever reason which I can't quite figure out.

You know, the Paramount guys keep saying, you know, Larry Ellison is going to underwrite Larry Ellison's revocable trust is going to backs stop this entire $41 billion of equity. So, don't worry

about it, guys. It's it's going to be fine. We the equity is there and the WBD

fine. We the equity is there and the WBD board just doesn't seem to believe that.

And part of like this weird technicality, and this is weird, I got to admit. Uh so the the the Paramount

to admit. Uh so the the the Paramount crowd says that the Larry J. Ellison

revocable trust owns the 1.16 billion shares. If you go to the Oracle proxy

shares. If you go to the Oracle proxy statement and you look, there is no Larry J. Ellison revocable trust. And

Larry J. Ellison revocable trust. And

then if you look at their 13G filings, there is no Larry J. Ellison revocable

trust. So I mean maybe it's a technicality, but I got to, you know, the WB crowd is saying, "Hey, what's going on here? Is there a error with the SEC filing? Is that a problem? Or is you

SEC filing? Is that a problem? Or is you guys got a labeling problem or >> So they are looking at Oracle uh stock then like they are paying attention.

>> They're looking at the proxy.

>> Well, who owns the stock?

>> Who owns the stock? Okay.

>> Okay.

>> The trust is being managed by Jeffrey Epste. It's totally above. I hope

Epste. It's totally above. I hope

they're not looking at the CDS, I guess, would be my >> Well, the the the credit default swaps on on Oracle's debt have shot up and that debt is sort of like beginning to

look like junk debt, which is, you know, trading like junk debt, which is of course absurd.

>> You know, it probably, you know, >> so maybe it is a factor.

>> Well, I mean, I have it could be. I

mean, it certainly has occurred to me. I

haven't heard anybody say anything about that.

>> Okay. because again he's still the second richest man in the world and we're only talking about a mere 41 billion out of his $350 billion fortune.

So >> Bill, do you think that do you think that like Oracle the Ellison not Oracle, excuse me, the Ellison family are playing games? Like if they wanted it so

playing games? Like if they wanted it so badly, why don't they just make it and they're making it clear, but like why play games or do you think that they're being straight up and Warner has already decided that Netflix is the buyer?

So, you know, now you're into the land of conspiracy theories, which I hear a lot of. So, uh I mean, the Ellison

lot of. So, uh I mean, the Ellison crowd, the Paramount crowd feels like they are being completely transparent about their desire to own it. Uh uh

their 30, you know, how they believe their $30 a share allcash deal has uh is superior, that they've given Warner Brothers everything they want. Now,

there's ambiguity with their $30 a share bid and how it compares to the Netflix bid because of the value of the global network stub, the CNN at all stub, which

you could argue is worth more than Paramount thinks it's worth and therefore WBD board was right in going with Netflix at this particular moment.

Okay, but nevertheless, put that to the side for a minute. They they believe that they have been very transparent about the Ellison's backstopping this equity, giving them everything they

want, and they don't understand why the Warner Brothers board isn't getting that message or feels like maybe it's like this thing like this technicality with the Oracle proxy. I don't know. But I

think there's a sense among the Paramount crowd that maybe the the deal the fix was in and that and and that uh

uh that Zaz wanted to do the deal with Ted Sarandos at Netflix and it's always been like that and he can run the the uh streaming and studios business for

Sarandos and have a real job in Hollywood and he wasn't going to get a real job working for the Paramount guys even though they did offer him co-CEO.

>> Well, now that ship's sailed, Zaz knows that he's not getting it anymore. Like

David Olson will definitely fire him. I

definitely I'm making that up. Who

knows? But what what about the aspect of the fact that >> doesn't need a he's the highest p is he the highest paid person in Hollywood?

>> No, but without the job. No, you don't have the juice without the job. Like he

wants he wants the limelight.

>> No, but he's he's only 65. You know, he wants to be a player. He's going to make $550 million when this deal goes through.

>> Yeah. Bill, what about the three Middle Eastern investments that would be coming in with the Ellison's to own part of a news network? Like that is that is

news network? Like that is that is definitely a part of the story.

>> Uh yes. Yes. Uh but as the first of all, they're they're they're supplying 24 billion of the 41. So that's like 60ish%.

>> It's a lot. So that's and I think the the three of them together will be the largest shareholder in the in the combined company. So that's uh there was

combined company. So that's uh there was concern that that would require CPHAS approval or maybe FCC approval because they would own CBS in effect or be the largest shareholder in a CBS CNN

combination.

>> No board seats, but whatever.

>> Well, but to to fix that to fix that they took they took away their voting rights and their board seats. So now

they've given it all to you know the Ellisons and Redbird. So I mean they believe that there won't be a CPHAS or FCC problem as a result of that but you know we don't know yet.

>> Can I can I stop you? Can I can I just ask maybe this is a stupid question.

Absent board seats and any sort of influence what is even the point if you're if you're Middle Eastern billionaires they're investing not just for the return. I think we all would

agree they're investing for influence.

They you wouldn't buy a golf tournament for example if the goal was ROI. So what

is the or is it a Trojan horse where they'll get the influence later? The

most important thing is get the equity today.

>> Yeah, I think that um they will use some sort of soft uhish influence. They they

will obviously have direct access to the Ellison's and Redberg has the relationships to begin with. Jerry

Cardell has those relationships. That's

how the money came in in the first place. So they're they're going to have

place. So they're they're going to have access to the equity owners. Whether

they'll be sitting around, you know, the the boardroom, I guess they won't be. Uh

you know, we all know how this sort of soft influence works. Uh

>> they'll decide on who's the who's the board member, >> but it doesn't even matter. There Well,

there's that and then there's money.

Money is power whether you're on the board or not. Like they say, "All right, well, we have another $10 billion for that other deal that we're not going to do." How do you like that?

do." How do you like that?

>> Right.

>> Yeah. They'll they'll have the influence they want. Now, whether you know it will

they want. Now, whether you know it will rise to the level of needing CPHAS or FCC approval, obviously Paramount is

hoping that it won't. Are you surprised uh that the White House didn't at least from the outside looking in, I don't know anything that's going on internally. Are you surprised that the

internally. Are you surprised that the Ellison deal didn't just automatically win because quote unquote that was the most likely deal to get approved? Um

does that does that surprise you or not really?

>> No. No. No. Uh I think the WBD board is number one well advised. It's uh made up of you know a lot of deal guys. Uh and

you know if you look at the the final bid deadline was December 1st. If you

look at that final bid deadline it really it wasn't even close. Netflix had

the better deal on the economics. Then

>> told that they were going to lose. Uh

that's when Paramount threw in on December 4th their $30 a share allcash bid. Now, even at $30 a share allcash

bid. Now, even at $30 a share allcash bid, the WBD board deliberated and did their valuations,

I mean, with their bankers obviously, and they decided that the 2775 Netflix bid plus the value of the global

network stub was worth more than $30 a share. And I think, you know, in their

share. And I think, you know, in their business judgment, they could arguably very definitely reach that conclusion.

And no one's gonna really scratch their head about it because, you know, the global networks business, you know, of course Paramount wants that to be valued as low as possible. So it looks like

their $30 bid is the winner, but so they value it at $1 a share. Whereas, you

know, Jessica Reef Erlick, who you know, at at Merrill, who's very reputable, you know, she valued it at $5 and then now

at $3. So at $3 a share, that plus the

at $3. So at $3 a share, that plus the Netflix 2775 for studio and streaming is worth more than 30. So bingo. I mean,

it's not really uh an economics alone. I

mean, there's no point in wondering about the the uh regulatory process, especially when they both say, you know, they're equally confident that they're going to get it approved. You go with

the one that's got the better economics.

And at the moment, >> you have to.

>> That is the Netflix deal. Yeah,

fiduciary responsibility to do that, right?

>> That's right. And I think that, you know, Paramount's been much better at making more noise about their bid.

Netflix has quietly been saying, "Hey, yeah, but ours is pretty good." The

other thing is that the Netflix uh bid was exploding. In other words, they, you

was exploding. In other words, they, you know, said to the WBD board, you know, whatever it was by midnight on December.

Yeah. Yeah. Exactly. And I think they said, "Okay, this bid is higher." uh is they've given us, you know, more of what we wanted in terms of the contract.

They're as confident about their regulatory approval as Paramount is and it's exploding. Even if people don't

it's exploding. Even if people don't believe it was going to explode, you know, debate whether exploding bids ever explode, but whatever. Uh they didn't want to lose it and so I think they did

what was absolutely the only thing they could do at that moment.

Bill, I want to zoom out for a second and rewind back to uh precoid days when Netflix was already a behemoth. The

streaming war was definitely raging. It

was not over at all. Um and it we have a chart showing Netflix's Ukan uh revenue.

So the US and Canada and it was creeping higher as a percentage of domestic box office. So in 2017 it was 6x and then it

office. So in 2017 it was 6x and then it was 7 the next year and 0.9 the next year and then co happened and it just absolutely buried the theater industry.

Of course the movie theater was basically closed the entire year. It

shot up to 5.4x and then it has since come down but it has normalized at around 2x. So Netflix is doing just in

around 2x. So Netflix is doing just in the US and Canada 2x the amount of box office revenue. So Netflix already won.

office revenue. So Netflix already won.

So that's why I and so many others were shocked because we understand why Paramount really needs these assets if Paramount doesn't have it. And we'll

talk about that where they land after this deal goes through ostensibly to Netflix. And again, it's still up in the

Netflix. And again, it's still up in the air. But I was surprised. Why do you

air. But I was surprised. Why do you think And everyone's saying, "Well, it's it's it's YouTube." Like, okay, why did Netflix do this? I I'm still scratching my head. They didn't have to do this and

my head. They didn't have to do this and the shareholders don't like it. Why are

they doing this?

>> Yeah, their shareholders clearly don't like it. Uh they have an investment

like it. Uh they have an investment grade balance sheet. Uh and after taking on 59 billion of debt, uh new debt to do this deal, then their balance sheet is

going to be sort of on the edge between junk credit and investment grade credit.

Um, so you know, they're they're definitely kind of upending their company and the formula that um, you know, that has made them so successful, made them a half trillion dollar

company. But, you know, if you look at

company. But, you know, if you look at it, they've been upending their formulas for a long time. I wrote a piece in Vanity Fair in 2012 before you were alive, Michael. Uh,

>> oh, stop it. I know they split the business. I remember

business. I remember >> they they split the business. remember

it was the red envelope business and then Reed Hastings was talking about the streaming business and he's going to split the company up. That freaked out shareholders. He had to retreat from

shareholders. He had to retreat from that. It was a big disaster. Of course,

that. It was a big disaster. Of course,

he was absolutely right. Right. Because

streaming is obviously very powerful force and taking over the whole >> good bank, bad bank.

>> It was and but he had to retreat from that. And I did a whole story about how

that. And I did a whole story about how you know Reed was in the doghouse and he's you know stepping on his you know committing her carry etc. So, uh, you know, and then, you know, they said they

weren't going to, uh, do sports, uh, and now they're into sports. They said they weren't going to have advertising, now they're into advertising. So,

essentially, a lot of things that they said they would never do, you know, they are doing. They said they would never

are doing. They said they would never buy, you know, they >> never until it makes sense.

>> That's right. And you know, if you can get access to the Warner Brothers library and the HBO Max content, you know, and you've got Netflix, you've got this streaming business that, you know,

if you put them together, has like 450 million subscribers. I mean, hello, you

million subscribers. I mean, hello, you know, game over. Which is why Elizabeth Warren and others are like on the war path, you know, against the against this deal. Uh, and of course the fact that

deal. Uh, and of course the fact that Elizabeth Warren is against it will probably mean it gets approved just because Trump wants to stick a stick in the eye of Elizabeth Warren. But, uh,

you know, so I mean, but I do think, now this is an important point. I do think there is a limit to how far uh, Netflix is is going to go. I think they're smart

guys. Uh, I think they are are near or

guys. Uh, I think they are are near or at their limit. I don't think they want to get into a bidding war with with the second richest man in the world. So, I

think there's also a scenario soon. In

other words, if if Paramount raises its bid to say $34 in cash, as I suggested they should the other day, and that would make, you know, that would be sort of game over. I don't think Netflix

would match that because uh that would mean they'd have to incur even more debt and that would push them into junk territory. Uh that would piss

off their shareholders even more when what they could do at that point is take their $2.8 billion breakup fee, get some sort of long-term supply contract with

Paramount Warner Brothers Discovery and be as happy as ever. They also, but then they also drive their competitor to spend even more.

>> Exactly. So maybe they thought it's a win-win.

>> Comcast did with Disney in the in the Fox Hollywood asset.

>> Yeah.

>> So maybe it's they won, we lost next, right?

as as as as Barry Diller said back on that deal that I worked on that Paramount Viacom deal back in in the late 80s early 90s uh where you know QVC

lost and Barry Diller said exactly that they won we lost next.

>> Yeah.

>> And and I think Netflix is in a position to soon declare victory here. They will

have gotten Paramount to pay up. They

will have gotten a breakup fee. And if

they can get this long-term supply agreement with this Paramount Warner Brothers Discovery, then you know they it's a win-winwin and their share price goes up because they're not pissing off

their shareholders anymore and they go, you know, continue on the Netflix rampage.

>> Let's let's imagine uh let's imagine you're on Koshi and you have to make a bet. Uh we'll show we'll show you the

bet. Uh we'll show we'll show you the betting odds, but >> Yeah. Okay. No, that's Oh, okay. And and

>> Yeah. Okay. No, that's Oh, okay. And and

I just think that's totally wrong. By

the way, >> what did you Wait, what did you see that you think is totally wrong?

>> So, hold on, Bill. What we have in the dock, that's stale. I wanted to show you.

>> Yeah, that's stale. That's not lying.

But that just shows that Netflix wasn't even in the picture.

>> So, I don't know what it is right now. I

don't know if Paramount's in the lead or not, but it's pretty close.

>> Okay, because that's that that that's uh that to me said that Netflix is going to win by 100%, but I don't that's clearly not.

>> What? So, where would you where would you where would you put where would you put the the odds or I don't know what percentage would you ascribe to Paramount being the buyer versus

Netflix? What do you think?

Netflix? What do you think?

>> What I've been saying, Josh, is 5545. I

think Paramount odds are 55% that Paramount raises their bid and wins here.

>> Okay.

>> So, I agree with you. I think that you're right. Um, to the extent that

you're right. Um, to the extent that we're speculating, I think it's unlikely that Netflix is going to come over the top. They they're those are smart guys.

top. They they're those are smart guys.

They see their share price. They

understand the economics of this. But on

Koshi, as of today, Netflix is at 72%.

Paramount is only at 25%. And and uh it says none before July 2027 at at 7%. But

Paramount's only 25. So Bill, if you're a betting man, I'm I'm just kidding. But

uh not bad value there.

>> Yeah, there there's there's a bet to be made. Um but it's not going to be by me.

made. Um but it's not going to be by me.

Uh uh yeah, I think it's harder than that.

So, I I wish I wish Matt were here to talk about this. Um, but the the ramifications for Hollywood. So, they're

both talking about synergies, okay? And

we know what synergies mean. In the case of Netflix, a lot of the synergies are going to come from layoffs because there is duplicative systems. Now, they don't have the studio like Paramount does, but

um a lot of the synergies are going to come from uh uh fees that they're licensing fees, >> not not paying for content that they now own. Exactly. Which could be

own. Exactly. Which could be substantial, but I view this like I would prefer this deal doesn't happen.

Who cares what I think? I think that this is just whatever the outcome, I think it's great.

>> Tim W agrees with you.

>> But so I am a movie I am a movie theatergoing. I went to see The Shining

theatergoing. I went to see The Shining and at Friday night in IMAX. I love

going to the movie theater. So Netflix

buying the Warner Brothers is not good for people like me that love going to the movie theater. Paramount buying the studio is really bad for labor in Hollywood because Paramount Studios

exists and a lot of the duplicous roles will be eliminated. So,

>> and I think their synergy number much higher than Netflix.

>> I think they're more more people they can get rid of.

>> Yeah. Right.

>> And they already have another two billion that they're supposed to cut from the from the first merger. So

yeah, it's it's a new it's going to be a new another new day in Hollywood and it's already been a rough patch for Hollywood and um it's one less buyer

it's one less buyer for content is a really big deal. So if you're putting together a show or a movie now you have one less person at the table because >> and it's already been tough enough

>> and it's already been tough enough. Um,

I think one of the problems though is every everyone anchors to the all-time high for everything, whether it's real estate or banking or whatever. And I

just like I I feel like tough relative to what because it ain't never going back to 2020, 2021. If you were selling content to the streamers and if you're

worried about uh physical box office in person at a movie theater, it ain't never going back to 2015. So, like we're all anchored to as good as it ever was.

>> Yeah. It's not going back because you know what? Streaming is a very good

know what? Streaming is a very good product. It's like what

product. It's like what >> I have an 85 in TV. Yeah,

>> exactly. You stay on your couch, you turn it on when you want, you go to the bathroom, you go get something to drink.

I mean, you Plus, you've already paid for it every month. It's not like an additional charge.

>> Look at this chart. We have a movie. We

have a number. What is this >> total? So, total number of tickets sold

>> total? So, total number of tickets sold by year. So this peaked in 2002 and it

by year. So this peaked in 2002 and it was shrinking I don't know a couple of percent a year. It was in secular decline and then of course the bottom fell out in 2020 but even with the rebound and we had a relatively strong

year in 2023. It was lower in 24 than it was in 23. It's lower. It's going to be lower in 25 than it was in 24. And it's

about I don't know is it two-thirds of what it was uh now half maybe. Like the

the Hollywood Hollywood is upside down.

Hey, you know, when I first got to Wall Street in the late 1980s, I did a number of movie theater deals. I bought all the movie theaters that Norman Lear bought

at Act 3 Communications. I I did those deals, not alone, obviously, but uh you know, that's when movie theaters were

booming. The EVID margins were like 65%.

booming. The EVID margins were like 65%.

Uh I mean, they were making like 85% EVID margins from the popcorn. I mean

50% even time margins from the ticket sales. It was a great business.

sales. It was a great business.

>> Yeah.

>> And now what uh >> not such a great business.

>> What happens to Paramount if the Netflix deal is is um consummated?

Is there another I know there's not one other asset that would be a consolation prize, but is there a collection of deals?

>> A24 Lionsgate like is there a bunch of smaller ones? Sure, they can they can do

smaller ones? Sure, they can they can do they can do those things. A Rich

Greenfield at Lightshed, you know, smart guy is starting to say that they should uh you know, they should buy NBCU, NBC Universal, or do some sort of joint

venture with with, you know, Brian Roberts and Comcast, which they were willing to do with with WBD. Uh so it's clearly that that you know after

spinning off Versent uh Brian Roberts is in a mode of thinking he's got to do something maybe if Paramount loses you know he does that with Paramount. Uh you

know there there are things that they can do. I mean you know the thing that

can do. I mean you know the thing that people are forgetting here is that I think the market cap of Paramount is like $15 billion. They're trying to buy something, you know, they're trying to

buy something for $108 billion and they have a market cap of 15, you know.

>> Yeah. The fish is trying to eat the whale. It's not easy to do.

whale. It's not easy to do.

>> Well, when you've got the second richest guy in the world and you've got the sovereign wealth funds of three countries in the Middle East, you know, you can you can begin to think like that.

>> Who does uh who does Disney want to see get this deal?

I mean, I think Disney's sort of like in its own insular world. It's going to be a survivor in this no matter what. You

know, Disney's, you know, got got to deal with it succession situation which is, you know, happening supposedly at the beginning, you know, next month, uh, where they're going to announce a new

CEO and then, you know, hopefully I will leave at the end of next year this time for good. uh you know so uh I mean

for good. uh you know so uh I mean >> they must be rooting one way or the other. And just to just to flesh this

other. And just to just to flesh this out, the DC cinematic universe is going to go to either Paramount or Netflix.

Which would Disney least rather see producing the next Batman Superman films?

>> Well, headtohead with Marvel.

>> Right. Right. I mean, right. I think

they they cannot like the fact that that that Netflix could have 450 million subscribers.

>> Yeah.

>> Right. I mean, so and then putting this content through 450 million subscribers is, you know, what Disney have 200 million

>> or less. I mean, so, you know, that's I I don't think anybody, you know, and none of the competitors are sort of hoping that Netflix wins because they're

going to be, you know, so dominant on the streaming side of things.

>> Bill, if Redstone were still alive and running Paramount, what would he be doing? And what would he think about

doing? And what would he think about what David is doing? Well, first first of all, he'd be ballistic that his daughter, you know, took it away from

him and, you know, merged Viacom and Par and Paramount and, you know, merged Viacom and CBS and created Paramount Global and he never wanted he he broke them apart. He didn't want them to be

them apart. He didn't want them to be together. uh and would probably hate I

together. uh and would probably hate I mean it was like a take under right that that occurred and uh I think he'd be

he'd be he'd be hating every minute of this uh for sure uh you know he might be happy for his friend David Zazlov I don't know uh where they can go to

Dantana together and have you know lobster tails or something >> the chicken parm there is is pretty good >> uh all right so before we before we put a pin in There's like one or two other

things we wanted to do with you.

>> Um, but like I guess my my final question would be >> if you are of the mind that Netflix loses, the stock is probably a screaming

buy because there's probably a lot of arbitrage pressure on it or maybe just negative sentiment surrounding the debt dynamics that you were describing. So a

take I I've recently sold Netflix. I

bought >> Michael recently bought. I guess if that deal were to fall through because Paramount does do what you suggest and go to $34 a share and Netflix says, "You

know what? Not worth it. Pay the breakup

know what? Not worth it. Pay the breakup fee, figure out a licensing deal where we can walk away with a trophy." If that happens, Netflix could add 50 points a share.

>> You look at you look at the the uh draw down it's in. So for me, that's like the really the big takeaway here >> and might be the right risk to take. And

and I do it if you believe that I do it, not that this is investment advice, but I would do it sooner rather than later before it's clear to everybody that the odds are in Paramount's favor.

>> Uh, you know, I I go back to, you know, Bill Aman buying a big stake in Netflix and then selling it after that one quarter where they lost subscribers and then the stock exploded.

>> Nobody's perfect.

>> Not his best trade.

>> Not best trade.

>> Wait, hold up, hold up before we move on here. I have I have one last question

here. I have I have one last question about this deal. So this might be a dumb question too. What ultimately happens?

question too. What ultimately happens?

Let's just say let's just assume that Netflix gets the deal. What does happen to the linear networks? Like so the shares so the shareholders ex own a different share class but like what happens?

>> They'll do what they did with Versent from Comcast, right? It'll be a >> well spun up like they did with Versent.

Now, if you listen to the Versen presentations, which I did the other day, I mean, they're they've got all these I mean, it's well beyond uh CNBC and MSNBC or MS Now. I mean, they

they've got all sorts of ideas of how to create value and get into new businesses and and you know, Gunnar Widenfells could do the same thing or or they could merge or somebody could buy them. I

mean, there was uh one group that was interested in buying the global networks that surfaced as part of this. uh it was mentioned in the filing uh uh on

yesterday uh without a name uh I think maybe it was stars I don't know but so there would be an M&A takeout

opportunity for this uh spin-off >> vers is coming public with no debt almost no debt and a lot of cash >> yeah what a billion of debt I think I mean not that much

>> right but relatively speaking they're not being spun out with a lot of debt whereas >> whereas as the the uh Warner Brother global networks is going to have 15

billion of debt. So it's it's got more cash flow but but it's going to definitely be more leveraged than vers V vers V vers V vers V vers V vers V vers V vers V vers V vers V versent yes >> so I wanted to ask you about uh Wall

Street and the banks because one of the one of the more fun storylines of this year is that you often hear Republicans come into office and talk about

deregulation but nothing much changes.

We we had real deal deregulation and not just deregulation but like just a new feeling in the air that more things would be possible, less scrutiny, less

ball busting like it would you could launch products, you could do crypto, you could right. So we sort of had like a little bit of a mini banking uh renaissance. I think Robin Hood was one

renaissance. I think Robin Hood was one of the top three performing stocks in the S&P 500 this year. JP Morgan, Bank of America, Wells Fargo City, all making

record highs almost every month uh on the calendar just in a succession of higher stairst step. It feels like it's a pretty good time for Goldman and

Morgan. Um capital formation is

Morgan. Um capital formation is happening. M&A, the IPO calendar has

happening. M&A, the IPO calendar has sprung to to life. Is that sort of the sense that you have as far as like one of the bigger stories of this year?

>> No, you know, absolutely. I mean uh uh you know the big the big Wall Street banks have been regulated to a relative

safety zone. In other words, they

safety zone. In other words, they they've got enough equity capital. They

don't have as much >> leverage. They they can't hold risky

>> leverage. They they can't hold risky loans. I mean, they're making money

loans. I mean, they're making money handover fist. It's a real igopoly. I

handover fist. It's a real igopoly. I

mean, JP Morgan Chase is going to make 60 billion of net income this year. Uh

Goldman Sachs's stock price was in nine $900 a share a couple weeks ago. I mean

um >> I think it's tripled off its low. Uh

Goldman Sachs remember you know when people were talking about David Solomon being on the way out. I was like saying I don't think so guys and now the stock

is has tripled. Uh you know I mean yes it's it's been a bonanza for what we consider the old Wall Street banks. Now

some of the alternative asset managers you know like you know KKR and Blackstone and Apollo and Aries and others whose business is also booming but people are worried about private

credit so their stocks have been hit a little bit. Uh

little bit. Uh >> not sure whether that's overblown yet.

My new book is about Apollo coming out next year. So, I don't know whether

next year. So, I don't know whether we're going to see the beginnings of a private creditled financial crisis situation or whether it's just more glory days for private credit as well.

>> Hard to time the launch of that book, right?

>> Yeah. Well, hopefully right at the time the book is out, then we'll have this big private credit disaster and everybody want Yeah, that'll go great.

We're all rooting for that. Sounds good.

>> Um, are you surprised at the jiu-jitsu or not surprised? Are you interested at all in the jiu-jitsu that the large banks have pulled off where they

themselves do not directly make the types of loans that um they had been dissuaded from making by regulation, but instead they will invest in Apollo and

Aries and the like who will then by extension make those loans. It's a nice layer of fees in the middle, but they're kind of they're getting their way into

private credit and and these this type of lending, but they're not getting their own hands dirty, and it sort of works for everyone in the ecosystem.

>> It's better.

>> What what what are your thoughts?

>> Yeah, I mean, I I think uh everybody's sort of getting most of what they want here. I mean the regulators don't want

here. I mean the regulators don't want the big banks to be uh the big depository institutions to be the genesis of another financial crisis

because then depositors get really hurt as we saw you know basically in Silicon Valley Bank and you know lean >> nobody actually gets hurt nobody really yeah apparently nobody really gets hurt

especially you know the the big depositors don't of course get hurt uh but I think you know basically DoddFrank bank has has has made the traditional

banking system safer than it has been.

Um, and you know, you see like with Apollo's deal with Croup, you know, Croup is, you know, controlling the client, which they want to do. They're

originating the loan and then they're immediately selling it to Apollo.

Apollo, you know, as they like to say, we want, I think it's 30% now, we want 30 30% of of everything and 100% of nothing. So they they are they want to

nothing. So they they are they want to hold 30% of these assets. Of course,

Croup wants to get rid of them, sell them to Apollo. Apollo holds 30% and and 70% goes syndicated off to other institutional investors and everybody's

apparently happy with this. Now the

question is, you know, uh like at Apollo, which owns Athen, which is a uh an annuity, you know, they they have annuitants. They owe people insurance

annuitants. They owe people insurance five 5% or whatever it is they owe them a year. I mean that is an obligation

a year. I mean that is an obligation that Athen owes >> those annuitants those retirees and if there's any problem with them ever paying what they owe them or anybody thinks that they're not going to pay

what they owe them then you're going to have a run on the bank or a walk on the bank or whatever it is and we could be in a you know a pain position again.

>> But Apollo owns the banks in this case the insurance company. I think I'm sure you're writing all about this and this is a different we don't have to go too deep into this but the insurance companies that are owned by the sponsors

that are buying all this private credit sponsor driven and the rating agencies that are not really rating agencies that are underwriting some of the debt and and and putting ratings on it companies you've rating agencies way outside the big three probably outside the big 15

that you've never even heard of again I'm sure you're getting into all that but bringing this back to the banks so our friend Michael Slas at JP Morgan has a chart >> I like Michael >> and this is wonderful he basically

breaks down to Josh's point. Okay, what

are the economics of us making a loan to a middle market company? What's the

return on equity versus let's just make the loan to the BDC, the sponsors of the Apollos of the world? The return on equity, the default rates, everything is

way better with this. So, it's not to suggest that there is no risk in the system, that there isn't leverage, that there aren't bad deals. that sort of always exists. But I do think gen

always exists. But I do think gen generally speaking this is a cleaner structure for everybody.

>> It's it's hard to disagree with you and it's also more regulatory friendly.

>> Yeah.

>> So >> everyone So to your point, everyone's getting everyone's getting what they want out of it.

>> Everybody's getting what they want, you know, right? everybody's getting what

know, right? everybody's getting what they want and they're happy, you know, until potentially, you know, something cracks and and then everybody, you know, runs for the hills again.

>> But to your point, equity investors in these companies are are thinking that there's cracks because you look at Blackstone, which I own. You look at Apollo, KKR, Carile, whatever. All of

the equities in these companies, and guess this is the part that I like.

Okay, fine. If Apollo makes bad deals, who gets hurt? The equity investors in Apollo or the credit, whatever it is.

Like I separate that from depository institutions.

>> I'm not discounting Capitalism is happening in the market every day.

>> And and and I don't think Apollo really is making bad loans or at least it's not showing up. Yeah, they're smart guys. So

showing up. Yeah, they're smart guys. So

maybe this is a buying opportunity because maybe that all that's oversold.

>> I think so.

>> Uh last thing, are you watching the Federal Reserve uh Apprentice season uh season 9? What what are you uh

what are you hearing from people or what what is your gut instinct telling you which Kevin will get the job?

>> I mean I don't know what they're saying on uh the prediction uh websites but this week >> they don't know anything.

>> Yeah, if I read the tea leaves it I mean Trump likes uh uh Trump likes a better looking guy. Okay. So WH Kevin Walsh

looking guy. Okay. So WH Kevin Walsh gets it because he's a better looking >> handsome. He's a better central casting.

>> handsome. He's a better central casting.

Trump likes that.

>> Morgan Stanley central casting. Uh and

he's going to give Trump what he wants, lower interest rates. So he's going to go with all things being equal, he can keep the other Kevin at the National Economic or Advisers, whatever the hell he is now, and he's can give the

better-l looking Kevin the job.

>> I think you told us this last time you were on our podcast. I think it was you.

Kevin Wsh is married to Ron Lauder's daughter. Ron Lauder is which is Revlon

daughter. Ron Lauder is which is Revlon is excuse me Lauder Sau. Duh.

>> Uh but that's but he's Trump's best friend. Not ally but like actual friend.

friend. Not ally but like actual friend.

So Kevin Walsh is almost de facto like uh Trump's well he was in the son-in-law and then and then and then Hassid seemed to like you know be the the leading

horse for a while but now in the stretch you know down at the wire he looks like Kevin Walsh might you know beat him out by a nose.

>> Okay. Uh all right listen Bill we really appreciate this is your flu game. So we

really appreciate you uh you you coming on and doing the show with us. I can do it.

>> All right.

>> You did great. And the audience is thrilled to hear from you. You can hear that, right? They are they are uh

that, right? They are they are uh enraptured. All right. Uh Bill Bill

enraptured. All right. Uh Bill Bill Cohen, we really appreciate you coming on. I want to uh I want to know where we

on. I want to uh I want to know where we can tell people to go to follow more of your content. I know it's um the dry

your content. I know it's um the dry powder newsletter >> puck. News. Okay. You're on Twitter.

>> puck. News. Okay. You're on Twitter.

>> Okay. What's the Do we know the name of the book yet?

>> I do, but I'm not quite at liberty to release it.

>> Fair enough. I'm sure we'll have you back.

>> I'm sure we'll have you come back on when the new book is coming out as well.

>> And uh and and we'll see you then. All

right, guys. Thank you so much for watching. Thanks for listening. Merry

watching. Thanks for listening. Merry

Christmas. We'll talk to you all very soon. Thanks again, Bill.

soon. Thanks again, Bill.