Another billionaire thinks he can fix Warner Bros.

Acquiring Warner Bros. never goes well for anyone. AOL failed, AT&T failed, and Discovery failed — although it did succeed in flipping the assets to David Ellison’s Skydance. So I’m talking to Peter Kafka, Business Insider chief correspondent and host of Channels, to see if Skydance has a chance at succeeding where nobody else has yet. Spoiler alert: Peter doesn’t think Skydance has a clear business plan, either. But he’s got some really good guesses about what might come next. Read the full interview transcript on The Verge. Links: CNN boss remains as Paramount, WBD merge into Skydance | The Verge Skydance CEOs: Layoffs will be coming | Variety Ynon Kriez, the new Skydance co-CEO | Business Insider Skydance sets leadership across games, experiences | Variety Paramount settles lawsuit blocking $110B WBD merger | The Verge Larry Ellison’s big dumb gift to his large adult son | The Verge Weiss’ ratings wipeout | Status Decoder is a Signal Awards finalist in the Business category! You can vote to help us win her. Subscribe to The Verge to access the ad-free version of Decoder! Credits: Decoder is a production of The Verge and part of the Vox Media Podcast Network. Decoder’s producers are Greg Ott, Kate Cox, and Nick Statt. This episode was edited by Ursa Wright. Our editorial director is Kevin McShane. The Decoder music is by Breakmaster Cylinder. Learn more about your ad choices. Visit podcastchoices.com/adchoices

• 0:00Speaker 00

  Why can't we get AI to production? Our competitors are already. How do we keep data secure? AWS AI cuts through the noise. Ready to use agents and the broadest set of AI tools. Stop overthinking. Start building. AWS AI is how.

• 0:18Speaker 01

  Hello and welcome to Decoder. I'm Neelai Patel, editor in chief of The Verge. And Decoder is my show about big ideas and other problems. Today, I'm talking with Peter Kafka, chief correspondent at Business Insider and host of the Channels podcast about the gigantic Warner Brothers Paramount merger and the future of the company now simply called Skydance. Skydance is owned by David Ellison, son of Oracle CEO Larry Ellison. And it's a deal to acquire Warner Brothers Discovery officially closed the day Peter and I recorded this conversation. Ellison and Skydance have obviously grand ambitions for Warner. But the reality is that acquiring Warner has never gone well for anyone. AOL failed to do anything with Warner. AT&T failed. Discovery failed, although it did succeed in flipping the assets to Skydance. So I wanted to ask Peter if he thinks the Ellison's and Skydance have a real shot at succeeding. There's so many other companies who've hit the rocks.

• 1:03Speaker 01

  It will probably not shock you to hear that Peter doesn't think Skydance has a clearer business plan than any of the last few companies that tried to make Warner Brothers a success. But he's got some really good guesses about what they might try next. On top of that, he just heard a profile of new Skydance co-CEO Enon Krees for Business Insider. He has quite a lot of insight into what he might be tasked with doing at the new company. Before we get going, do me a favor and subscribe to Decoder on YouTube, where we release new episodes every Monday and Thursday. Okay, Peter Kafka on Warner Brothers and Skydance. Here we go. Peter Kafka, you're the chief correspondent at Business Insider. You're the host of the Channels podcast, our sister podcast here on the Vox Media Podcast Network. Welcome back to Decoder.

• 1:40Speaker 00

  Thanks for having me. It's Big Media Day again.

• 1:42Speaker 01

  It's Big Media Day. It's an auspicious day, as my parents would say. It is the day that the Warner Paramount merger closes. We've all been calling it Warner Mount, but I'm told this company will instead just be called Skydance.

• 1:54Speaker 00

  Skydance.

• 1:56Speaker 01

  Which is quite a name. Every time I see the word Skydance, I assume it is foreign, which maybe is probably true in this deal.

• 2:05Speaker 00

  Another way to think of it is there's iconic names in Hollywood. Paramount, such an iconic name that Viacom turned itself into Paramount years ago. Warner Brothers, legendary studio. Let's get rid of those names. Let's add Skydance, which no one's ever heard of.

• 2:20Speaker 01

  Let's just start at the start. There was Paramount. There's Warner Brothers. The deal closes today. That is all going to be a new company called Skydance. Is Skydance just a holding company? Are we, as consumers, meant to know that this thing exists?

• 2:33Speaker 00

  I think for the near term, you're still going to think of companies like Paramount and Warner Brothers and HBO as brands you know. But this is going to be one company. They're going to merge everything together. They're likely going to merge the streaming services Paramount and HBO into a thing, not right away, but eventually. So I do think Skydance will be a name that consumers will probably know at some point.

• 2:58Speaker 01

  I just have to ask, what are the chances that HBO Max will be rebranded yet again into Skydance?

• 3:03Speaker 00

  There's probably going to be some branding stuff. Not again in the near term. There's actually some, because this is still a cable TV company, there's actually some limits on what these guys can do with their brands and their services in the near term. And they won't come out and say, we're going to mush this stuff together. But there's likely to be one mega streaming service. And maybe you can get HBO separately, or maybe you can only get HBO or only Paramount, but it's going to be one thing. And one movie studio. And it's all going to get mushed together. And it's all going to be run by David Ellison.

• 3:35Speaker 01

  David Ellison is just the latest to believe that he can buy Warner Brothers and make something good happen. I have joked many times on the show that maybe the only antitrust policy this country needs is to make it illegal to buy Warner Brothers. And that would just solve a lot of problems. Why does he think he will be successful?

• 3:53Speaker 00

  Well, his dad's the eighth richest man in the world, so that's not nothing.

• 3:57Speaker 01

  That Oracle stock is tied up in a bunch of AI stuff. It's moving up and down.

• 4:02Speaker 00

  We can talk about that. But one, that means that he literally has the money to buy this. Two, and two, that this is a public company kind of in name only. David Ellison and Larry Ellison, his father, control this company effectively. They don't really need to worry that much about shareholders, equity shareholders. Debt's a different issue. And he's 43. He's got a long run backed by tens of billions of dollars of his father's money to take a stab at this. And like you said, he will not be the first person to do this. So there's a long list of failures. I think maybe that's appealing to guys like him. Like, everyone else is dumb. I'm the smart guy who's going to figure it out.

• 4:42Speaker 01

  Everyone else is dumb, and I'm smarter than everyone else is very appealing. But that long list of failures, if you just look at it, they're all shaped like this idea. We're going to take iconic Warner Brothers content. We're going to marry it to new distribution. We're going to reduce the overhead and costs and decadence of Hollywood. Where does new revenue come from?

• 5:02Speaker 00

  There's no plan for new revenue. There's no announced plan for new revenue. Right now, it's shrink. It's cut costs. It's when we mush these two companies together, we're going to save $6 billion over the next three years. We promise that most of that's not going to come from layoffs, but a lot of it's going to come from layoffs. These are companies that have been, had had many, many rounds of layoffs prior to this. And you could argue, well, there's probably not that much more to cut. I think reasonably, you could say, look, if you combine two big streaming operations, two big studio operations, there probably is stuff. You can probably sell off some real estate. You probably don't need all the executives you currently have. There's some savings there, but yeah, how you grow? No idea. And no one's really articulated that.

• 5:46Speaker 01

  Growth is required for a couple of reasons here. One, yes, there are going to be shareholders. People will be looking at it. There's David Ellison's ego. Then there's debt. This deal is levered to the max, right? There's.

• 5:59Speaker 00

  $80 billion.

• 6:00Speaker 01

  Yeah.

• 6:01Speaker 00

  Eight, zero. But more important than the number is the reason that David Ellison was able to buy Warner Brothers is that the last owner couldn't deal with the debt that he took on to buy the company. And that was the mere $43 or $50 billion, depending on who was counting. This is David Zaslove, the former CEO of Warner Brothers Discovery, who spent his entire tenure running that company, telling Wall Street that yes, he was going to get the debt down. And that was his main focus. And debt, debt, debt, reduce, reduce, reduce. I mean, he did reduce some debt, but he never convinced Wall Street that he had a plan to grow. Wall Street gave up on this company years ago, which is why when David Ellison decided he wanted to buy it, the stock was like seven bucks or something like that.

• 6:46Speaker 00

  Eventually bought it for, you know, many, many times that. And now David Zaslove is considered, well, he considers himself a genius for selling the company at such a high price. You could also argue, as someone told me yesterday, like, it's a unicorn sort of manifested itself and allowed David Zaslove to exit the situation he put himself into. I don't know who the next unicorn will be for this company if David Ellison at some point decides, ugh, actually, this is a lot of debt and a lot of pain. I don't want to do this anymore.

• 7:15Speaker 01

  I want to come to that because I have a little bit of a conspiracy theory. It's a little bit supported by the attitudes of some of the players here. But we'll come back around. Even the previous owner, AT&T, which is remarkable that AT&T was the, in somewhere in this chain of ownership, AT&T owned Warner.

• 7:30Speaker 00

  Yes.

• 7:31Speaker 01

  They could not deal with these assets. Their plan was to distribute Warner content on AT&T phones, which never made any sense. But they, they were a more aggressive owner.

• 7:40Speaker 00

  It also wasn't really their plan. Their plan was, hey, Netflix is a really valuable company. Their stock is very high. We're this boring telecoms company. Our stock is not moving. What if we owned a Netflix? I bet Wall Street would reward us as a high-flying tech company all of a sudden. And Wall Street didn't. And within a couple of years, AT&T said, oh, yeah, no, we're out of this. And yes, they had said a bunch of stuff about mobile and connectivity and ads and targeting, and none of that ever went anywhere.

• 8:09Speaker 01

  I will never forget covering the, their antitrust case. When they had to get approval for that deal, they convinced the judge that they had a vision of the future. And the judge in that case, in the opinion, the appeals court opinion, wrote, this is a vision deal. And I thought, we're doomed. Like, I don't know what's going on in our.

• 8:27Speaker 00

  I want a vision deal. How do I get one of those?

• 8:30Speaker 01

  I was like, I don't know what that is at all. So we have a lot of debt. We've got, the FCC had to waive the cap on foreign ownership. There's 49% of money from the Gulf in this company. Then there's the Oracle of it. And I've always wondered why anyone would trade what amounts to an AI stock for a media stock, especially right now. But the AI trade is a little shakier than it was before. Oracle has been punished a little bit for this deal. What do you make of that? Is that an effective backstop?

• 9:02Speaker 00

  I don't know if Oracle was punished for this deal. I mean, there was a period a year ago where Larry Ellison's net worth was double what it is now. And you could say, well, that was just a weird AI blip. It's still a very highly valued company. He is still the eighth richest man in the world because of his Oracle holdings. Wall Street is a little bit nervous now about the fact that Larry Ellison, his source of wealth is Oracle. He's borrowing from Oracle. He has backstopped the Warner Brothers deal by pledging to come up with $40 or $50 billion if he needs to. And there is a question of like, all right, not only is Oracle sort of intimately tied into this new media company, Oracle's also entirely dependent on one AI company, OpenAI company, for its new plan.

• 9:46Speaker 00

  So late in life, Larry Ellison is 82 years old. He decided he's kind of putting the entire company on AI and on OpenAI specifically. And while he's not doing that, he's going to use some of that money to fund his son's media empire. So it's, I don't know if it's rickety, but it's definitely a question mark.

• 10:13Speaker 02

  You're either all in on this model, or maybe you're building with another. You're either speed, or is it security? You're either custom, or are you ready to use? Or you're AWS AI. With hundreds of models, ready to use agents, speed and security built in, you don't have to pick a side. You can have them all. How will AI revolutionize your business? AWS AI is how.

• 10:50Speaker 01

  I open Instagram. Right now, my Instagram algorithm is crazy because I keep looking for Instagram's tolerance for copyright infringement. And it is high. Instagram has basically unlimited tolerance for copyright infringement. Mark Zuckerberg is posting deep fake memes of himself doing rap videos now.

• 11:09Speaker 00

  These are detailed. By the way, Neelai, you know who's figured out the Instagram and Reels algo? You. I get so much Neelai front facing video. You're very good at it. You should consider being an influencer. You have you have figured this out.

• 11:24Speaker 01

  I try to deeply understand the things that are going to kill me. And so that's we're just looking at that one. And I'm looking at my daughter. I'm like, I should know what's going on here. All this AI is it makes it impossibly cheap and easy to just take the IP from these movie studios. I watched a video last night of the Heath Ledger Joker and the Christian Bale Batman just doing doing a Justin Bieber video. And then I was served 5,000 more videos like this.

• 11:51Speaker 00

  Yeah.

• 11:52Speaker 01

  That's the OpenAI business. They're going to destroy the creative foundations that make the IP valuable that Warner Brothers makes. And somewhere in there is a big problem that I can't quite figure out.

• 12:04Speaker 00

  Yeah, I think it maybe is simpler than that. You're right, there's all kinds of copyright issues. Your value of your library may be much less if someone can just take it without paying for you. But I think the bigger issue for David Ellison and anyone in the media business is the you what you really want is people's attention. You have this company saddled with $80 billion in debt because it makes all kinds of entertainment, really expensive movies, all this sort of stuff. And now anyone can make anything that will at least get your attention for a few seconds on Instagram and TikTok. And so there's this flood of stuff, whether it's copyright infringement or not, it's just stuff that the David Ellison's of the world have to contend with because your daughter

• 12:48Speaker 00

  and my kids will might easily watch that stuff rather than the original Batman movie. I think that is sort of the existential problem for Skydance, but every media company today.

• 12:58Speaker 01

  But the Skydance purchase is being funded by the OpenAI deal by Oracle Money. OpenAI just took all the stuff, right? This is a thing I can't quite square is if OpenAI succeeds at the level that is necessary for the Ellison family to stay wealthy, then they will have massively profited from overwhelming IP theft. And they will have a product that can make anyone a movie at any time for $0, rendering Warner effectively useless.

• 13:32Speaker 00

  Maybe you're right. Again, I think I think there is a core tension here in that the reason you say that that Skydance is worth what it's worth is because of its existing library and its ability to make new stuff. And a lot of that may be much, much less valuable going forward. There's a counter that says, look, you know, people were stealing music for decades and somehow Spotify and the music industry figured out how to actually sell, you know, $120 worth of music a year to people who were only buying two CDs a year prior to that. So maybe there's a way to math yourself out of this, but we don't know yet.

• 14:14Speaker 01

  There's other constraints on this deal. This deal is actually marked by constraints and challenges in a particular way. The big one is that in order to settle the antitrust lawsuit filed by California and a bunch of other states, they agreed to put out 30 films a year or pay $30 million per film that they missed into healthcare and retirement funds managed by the unions. After two years, they have to go up to 32 movies a year. And if they don't hit that, they've got to sell their like 50, 49% stake in Miramax. This is a pretty intense constraint, right? They've got to just make a bunch of movies. They do not make this many movies right now. So how are you going to cost cut your way into making more movies?

• 14:58Speaker 00

  I think the math there is we have these two studios. If you sort of totaled up what they were going to do already, it's close to 30. And to be clear, this is not really a constraint from California. This is a pledge that David Ellison was shouting from the rooftop for months and months and months. And if you want to, we can talk about the non settlement he extracted from California. But this is this has been David Ellison's pitch for a long time. I think the main thing is David Ellison has proved that he can sort of get California and regulators around the world and definitely federal regulators in the Donald Trump era to go along with whatever he asks for. I don't think they're going to be constrained by regulation. I think they're going to be constrained by math and debt.

• 15:40Speaker 00

  And are you shaving that debt down fast enough to make bondholders happy?

• 15:44Speaker 01

  I'm actually asking that math here. I do want to talk about the non settlement, but the 30 films a year going up to 32, I don't know if there's a market for that. It's not like the box office is growing at the rate to support that. And if you need to pay down your debt, the first thing you would do is stop making things that people aren't buying.

• 16:00Speaker 00

  I mean, there's some finagling, right? Like, what is a movie? Does a movie have to be released in movie theaters? You know, is a piece of shit that no one watches, is that a movie? And then again, I think in that settlement in California, they said literally like X number of movies have to be in a movie theater, which means a lot of them don't. So who knows what they will use to fulfill that obligation? But for the near term, I don't think that is going to be their primary problem.

• 16:25Speaker 01

  Let's talk about California for one second. I actually got an email from a reader saying that I always call out Republicans by name, but I only say California. So I will say it appears Gavin Newsom and Rob Bonta totally caved here. Ellison threatened to move to Nashville or something and they blinked. And I think the other states in that lawsuit were not happy that they blinked, but they totally blinked. What is the settlement? Does it have any teeth at all?

• 16:48Speaker 00

  No, it's all the stuff that David Ellison was already proposing. And none of the things that Rob Bonta, the Attorney General of California, said he was demanding. He was saying, we need structural remedies. I'm sure I don't need to tell a decoder audience what a structural remedy is. He's like, behavioral remedies are not adequate. It won't work. He was saying that up until the weekend that he caved, and then he caved. And he had this humiliating press conference where he had to stand up and say, this is this is a good deal. I really believe in it. Apparently, he was considered like a rising star in democratic politics and California politics. I have not been exposed to him prior to that press conference, but it's very hard to imagine that guy has a he doesn't seem to have a lot of juice. Anyway, enough about my political musings. There's very, there's very little in here.

• 17:33Speaker 00

  I don't think Paramount gave up a single thing actually to make this deal work. They you got it right. They they said, we're going to leave. If you don't give us what we want, anyone involved in anyone who's watched professional sports, who's rooted for a professional sports team knows how this goes. If you don't build me my new stadium, if you don't give me billions of dollars to refurbish my stadium, I'm going to leave. And sometimes those teams do leave, but most of the time they stay and they get what they want. And that seems to have been the Ellison playbook here. David Ellison's pitch to Hollywood for the last two years was like, I grew up here. I love movies. I love Hollywood. I love film. And then last few months was I'm going to ditch this and go to Tennessee or wherever else and fuck Hollywood, which is kind of hard to square those two things.

• 18:16Speaker 01

  But the second he got that settlement, he was like, no, I love LA. I was never.

• 18:19Speaker 00

  Yeah. I think they looked at this from the start as this is we'll say and do whatever we need to make this deal get done. And once it's done, it'll all be behind us and we can go back to loving LA and no one's ever going to pay attention to this. And by the way, he might be right.

• 18:33Speaker 01

  I do have to note that Peter is a Vikings fan. I'm a Packers fan. I do not believe the Bears are going to move to Indiana. We're literally watching the situation play out in front of us right now.

• 18:42Speaker 00

  That's a wild one. I will say the Minnesota North Stars don't no longer exist than the Dallas Stars because they did Minnesota was without hockey for several years. So sometimes these guys actually do follow through and move the team.

• 18:54Speaker 01

  Yeah. Speaking of Minnesota, who knew you don't need a quarterback to go for now?

• 19:01Speaker 01

  Let's talk about the NFL for one other second. That is the, the last time you were on the show, you pointed out that CBS broadcast television exists to sell the American people the NFL. That is the business. Speaking of math, of costs, there is a change of control clause in the NFL deal with CBS. They could come in there, they could raise rates, they could get Amazon or Apple or Google to throw a bunch of money on the table and basically tank this company. They could take CBS's business away. Does that feel like a meaningful threat right now?

• 19:33Speaker 00

  No. I, I think CBS will pay whatever it needs to pay to keep the NFL. It is existential for them. I think the NFL knows that. But also, the NFL, as much as they like streaming stuff and streaming deals, they like broadcast TV. They like that distribution. It's also a political football, pun intended. If the NFL went away from broadcast television, I think that becomes an actual national political emergency. You'd actually have Republicans and Democrats united to sort of stop it or do something about it. I, it's very hard for me to believe that the NFL leaves broadcast TV. And I think because CBS needs it so badly, I just, I think they'll pay whatever they need to pay.

• 20:16Speaker 01

  Let's talk about the structure of this deal. I love talking about corporate structure on the show, as you know. You have a profile of the new co-CEO of Skydance, Enon Krees. He was most recently at Mattel. There's actually a lot of Peter in this story because he left Mattel to go run Skydance and the CEO of Conde Nast, Roger Lynch, is leaving Conde Nast to go to Mattel. And we'll find out who the new CEO of Conde Nast will be. These are all Peter Kafka stories.

• 20:42Speaker 00

  It goes deeper than that. I met Enon Krees when he was running a company called Maker Studios.

• 20:48Speaker 01

  Oh, my gosh.

• 20:49Speaker 00

  Back in the, the YouTube MCN days, for any of your ancient watchers and listeners. And he sold that company to Disney, and I actually broke that story. And at the time, it was considered this huge deal. Disney's big bet on, on digital media. It's, the numbers are so small now, it's laughable. And that was a total failure. Long line of Disney digital acquisitions that did not work, that really snake bitten there. Krees was the guy brought in that was a really woolly company founded by a group of YouTubers who were dating each other, but also harassing each other. And he was basically brought in first as chairman and then CEO to be sort of the grown up and to sort of whip this thing into shape and sell it off, which he did.

• 21:31Speaker 01

  It's funny, the MCN era ended because YouTube decided that MCN shouldn't exist and then it just killed them all.

• 21:36Speaker 00

  Yeah.

• 21:37Speaker 01

  Well, again, another theme that will emerge somewhere down the line in this conversation. Tell me about Enon.

• 21:42Speaker 00

  Enon is media, he's got lots and lots of media credentials. He ran Endemol back when that was a really important TV production company. He worked with Heim Saban, if any, no one knows who Heim Saban is anymore.

• 21:56Speaker 01

  Is he some mighty more from Power Rangers?

• 21:59Speaker 00

  Yep, exactly. Then did Maker and then went to Mattel, where he gets credit for making the Barbie movie. Now, he didn't actually make the Barbie movie, the long running thing, but he, you know, put that deal together with Margot Robbie and giant, giant success. So that counts as a big win. He also cut 22% of Mattel's workforce, sort of immediately getting there. And that's sort of what you bring Enon Krees in to do. You don't bring him to like have lunch at the Polo Lounge and to make nice with talent. You bring him in because you need to whip things into shape and cut things. And that's his deal. I was talking to a bunch of people the last few days. He strikes me as a guy who doesn't have terribly high EQ. Other folks say, no, no, no, no, he's very, he's tough, but he's actually

• 22:44Speaker 00

  a teddy bear if you get to know him. I think most people who get laid off by him will consider him a teddy bear. But that's, that is his job. His job is to go do the unpleasant work of finding $6 billion in synergy. Because you are a corporate structure lover, you probably have noticed that while Enon Krees is co-CEO of Skydance, David Ellison is not the other co-CEO. David Ellison is the CEO. So at a minimum, we have a 1A and 1B thing. But also, let's be clear, David Ellison and his father own the company. So ultimately, it's their deal. I think quite clearly what David Ellison wants to do is be able to have

• 23:24Speaker 00

  lunch at the Polo Lounge or the San Vicente bungalows or wherever they go. And someone will come to him and say, I'm really angry about this layoff or this movie project that you canceled. And he'll say, oh, that sounds terrible. You should really talk to Enon about that. My hands are tied. That's, that's Enon Krees's job.

• 23:42Speaker 01

  Ellison wants to hang out with Tom Cruise. This whole thing from like start to finish is like one guy wants to hang out with Tom Cruise and he's going to manufacture a company that will allow him to that scale.

• 23:51Speaker 00

  I will, I will give David Ellison more credit than that. David Ellison, when he ran Skydance, his primary achievement was befriending Tom Cruise. And I'm sure he liked hanging out with him. But that's why Skydance was a company, was that David Ellison was in the Tom Cruise business. He was in the Mission Impossible business, the Top Gun business. That is what the job of a producer is, is getting people to, you don't really do anything as producer, you just sort of package stuff. And he was able to be in the Tom Cruise business. And that's what got him as far as he's been able to get so far. And that, that is his job. That was his job. Now he's got a different job.

• 24:25Speaker 01

  There's probably a PhD thesis on the kind of personality that accepts a co-CEO title without another co-CEO.

• 24:30Speaker 00

  I've thought about that from the get go because the, the, the chain of events, was it last week? Was Roger Lynch, CEO of Conde Nast, said, I'm now the CEO of Mattel. For an hour or so, no one knew where Enon Krees was going. And then it was, you know, the rumor was, oh, he's going to have a job at Warner's. I'm like, well, what job could he take? He's already been the CEO of a big publicly traded company. These guys don't usually accept a demotion. And quite clearly, what he's, one, they said, all right, you're the, you're the co-CEO, so it's not a demotion. Two, there are only a handful of these giant media conglomerates. If you can run one, that's just a big notch to have on your belt. Number

• 25:12Speaker 00

  three, they're going to pay him $50 million this year. So that will help solve some of those wounds. And I think everyone sort of acknowledged it, like he's effectively the COO of Skydance, if you think about it. Just give him a different title so it sounds better.

• 25:26Speaker 02

  Why can't we get AI to production? Our competitors are already, how do we keep data secure? When do we actually see ROI? All this talk about AI, but talk doesn't transform businesses. AWS AI cuts through the noise, making AI easier to securely deploy and scale with ready to use agents and the broadest set of AI tools and services. You can build, buy, or partner your way. Stop overthinking. Start building. AWS AI is how.

• 26:04Speaker 01

  There's some other shuffling under that to do. You've got two movie studios. You have James Gunn running DC really well, actually. I think Lanterns is just a bona fide hit for HBO. You've got two news divisions, which we should talk about. How are they going to resolve these, are they just going to pick one team or the other?

• 26:32Speaker 00

  Yeah. I mean, they've already done that with streaming. Cindy Holland, who'd pioneered Netflix's move into original programming more than a decade ago, was brought in by David Ellison a year ago to run that streaming service. He's just bought HBO, which is run by Casey Bloys, very well regarded, who spent the last year making it clear to everyone that he would not work with or for Cindy Holland. I don't think there was personal animus. He's just like, I already run HBO. Why would I want to share power with somebody else? So it seemed pretty clear that David Ellison would pick that horse. And I think he's going to make a bunch of those calls. The people who ran Warner Brothers, who ran the Warner Brothers studio, which a year ago was the toast of the town, was making

• 27:16Speaker 00

  tons of money and critical acclaim. This year produced Digger, Tom Cruise's biggest bomb ever, and they're having a rough year. But it was always sort of clear that David Ellison was going to bring in his people. David Ellison is not an art film guy. He's not a guy who's going to allow Paul Thomas Anderson to make one battle after another again. He's in the Mission Impossible Tom Cruise-verse. So that's not surprising. CNN and CBS, people have been talking about merging those companies almost as long as I've been covering media. So that's not a new idea. They have said, I think wisely for now, well, we're not going to merge those two because we just know it's a fucking shitstorm politically if we touch that stuff. And this is pure speculation. They might also say, well, we

• 27:59Speaker 00

  hired Barry Weiss and gave her CBS News to run. And maybe we told her she'd also get to play with CNN. But it's been a rough year over at CBS and the Barry Weiss business. And maybe even if we're going to give it to Barry Weiss a couple of years down the road, let's, let's not stir that nest right now. So Mark Thompson, who's been running CNN, is going to continue to run CNN. But again, in the background, even no, no matter what Mark Thompson, you know, he has editorial, he has control of CNN, Enon Krees is still going to be in there saying, I know this is your business, but it's really my business and you need to cut 10% or 20% or whatever it is. And everyone has to do it. And so in some ways, yes, it matters who's running these individual studios and components. But

• 28:44Speaker 00

  again, the debt is hanging over everything and everyone is going to have to work to reduce that debt one way or the other.

• 28:50Speaker 01

  The Barry Weiss thesis at CBS, as charitably as I can put it, when she showed up, she was like, no one trusts the news and it's because we're not fair enough and I'm going to do more conservative stuff. And that was part of the regulatory arbitrage with the Trump administration. They were going to change CBS because Donald Trump did not like the coverage on CBS. And that worked or didn't work. But I think we now know that she did not increase trust in CBS News by making it a more conservative friendly organization. The ratings are down, like precipitously down, such that a lot of people think that she should just be fired and something else should happen.

• 29:26Speaker 00

  I don't see, yeah, I don't see that happening.

• 29:29Speaker 01

  Well, right, because he's got to, he's got to do regulatory arbitrage on both sides. We have midterms.

• 29:34Speaker 00

  And I, I, I think he likes Barry Weiss. I think, I think David Ellison, I mean, I think David Ellison is not a political person. I, I think his father Larry Ellison is probably not that political. Tom Dotan in Vanity Fair just did a profile of Larry Ellison and sort of gets at the idea of like, why is he, you know, he's bought these big media empires. He also owns a chunk of TikTok. Is there a thing here? And his conclusion is no, it's not. He really doesn't have much politics, but the one thing the Ellison family cares a lot about is Israel. Barry Weiss cares a lot about Israel. That is the one ideological through line there. And I think, I think they'd be loath to, to sort of cut her loose. And also it's been a clusterfuck over at CBS, but I don't know that she's done a worse job running it than anybody else has recently.

• 30:19Speaker 00

  It's just there's systemic decline. Now she may be making it worse. It's possible. And as a journalist, you may not like what she's doing, but if you're running the business, I don't know that she has made it that much worse. And I think the Ellisens probably don't like the headaches and headlines generated by it, but I also don't think they care that much.

• 30:36Speaker 01

  I mean, I, I go on TikTok and I see any clip from any 60 Minutes or CBS News account. And all of the comments are, you ruined this. Barry, I blame Barry Weiss. I can't trust you. That is a decline in trust from where they were before, when no one knew who was running CBS News. And I would actually.

• 30:52Speaker 00

  I think you should not know who the heads of, of, of network news are.

• 30:56Speaker 01

  Yeah. I, I think it's bad that the kids on TikTok are like, I hate this one person that has nothing to do with the, the, the video clip I'm seeing now. I bring that up because of the TikTok of it all. The idea that TikTok was a national security threat, that the United States Congress voted unanimously to ban, that Biden voted to ban, but then he knew it was political suicide. So he kicked the imposition of the ban to the Trump administration. All of that, as you peel apart the reporting, what did members of Congress see in their closed door meetings? It, it comes down as, as far as any of the reporting I've ever seen to they thought it was spreading pro Palestinian propaganda, anti-Israel propaganda. Now the Ellisens own it. As you said, they care very deeply about the issue of Israel.

• 31:41Speaker 01

  And I can't say that their ownership of TikTok has meaningfully moved the needle on how people feel about the war in Gaza in any way, shape or form. And I, do they, do they try?

• 31:51Speaker 00

  Perhaps people were disappointed with Israel's conduct prior to the invention of TikTok. Perhaps there's other reasons they may not be concerned. You know, and then the reason that, that Congress voted for this, this, it's one. It's, I really think maybe the only thing Congress has passed in years is this, this rule saying China can't own TikTok, which they then immediately forgot about during, you know, the first year of the Trump administration. I, I do think the China of it all was, was, was meaningful for some people, but they clearly also just didn't care. It's kind of wild to see Congress pass a bill that becomes a law and then not, not try to enforce it at all.

• 32:28Speaker 01

  I mean, they knew it was suicide, but there was, I don't know if you remember this, there was a, there was a day when it was the House committee. And like AOC was on this committee and they went into a skiff to view some intelligence about TikTok. And they all came out and voted unanimously to, to ban this thing. And no one for months could figure out what they saw in there. And it was like, did you see a picture of Chinese intelligence services, like turning the knobs and the algorithm to poison the minds of American youth? And they're like, no, no, no.

• 32:56Speaker 00

  They showed us some videos.

• 32:58Speaker 01

  Yeah. It was like, what, what are you looking at in there? Then we just sold it to someone who may or may not have some political leanings, but they have some control that is equivalent to whatever the Chinese control that was so scary that we had to ban this platform. I'm bringing this all up because that is the thing that is reducing the trust in the news media. It is not the news media itself, right? The news media makes its mistakes in whatever ways it makes its mistakes, but it's a bunch of influencers on social platforms who start every video by saying, here's what they're not telling you, that is actually the mechanism of reducing the trust. And then they read you the New York Times. Like that is, as somebody who not makes these videos.

• 33:37Speaker 00

  No one's covering this. Let me read you a New York Times story about it. I mean, the other thing that has, the other thing that's reduced trust in media is Republicans primarily for 40 years have been saying the media is biased. And if you say something for 40 years and you're one of the two parties running the country, I think that message sort of seeps in. Prior to TikTok, prior to social media.

• 33:55Speaker 01

  But if I had to pick the two things that are the biggest threats to the businesses that David Ellison now owns, I would pick AI and I would pick social media. And those are the other big investments of the Ellison family. Is this all just an elaborate hedge? Or does he have a plan to use TikTok to amplify his content, to market these movies?

• 34:15Speaker 00

  I don't think they have a plan. And one of the through lines when David Ellison was buying Paramount was David Ellison, successful producer, you marry, you add his dad who runs Oracle. He's got a lot of tech know-how. And also David Ellison is not just a movie producer, he's a technologist. This was the thing they stood up and said at a press conference. And he said, yes, yes, I was mentored by Steve Jobs. He wasn't mentored by Steve Jobs.

• 34:41Speaker 00

  But anyway, the, the whole premise is we're going to techify this and cloud and Oracle. And maybe they could save 10, 20, maybe a hundred million dollars on sort of back officey things by swapping in an Oracle contract for something else, although I think in normal world, you'd say just because your dad owns this company, we don't get to bring it in as a technology company for this publicly traded company, whatever. But there's never been any indication that they'll, that they've got any other plan other than shaving some costs. I don't think David Ellison is ideologically inclined. Maybe, maybe he will see something outrageous on TikTok that he doesn't like and say, hey dad, could you bring that down? I don't even know if his dad has the capacity to bring something down.

• 35:24Speaker 00

  You know, TikTok is a, is a black box. We don't actually know how the algorithm works and who actually controls it and who can steer it.

• 35:30Speaker 01

  The potential for TikTok content to end up on whatever this new Paramount HBO streaming service is high. And I know the other big media companies have long looked at the user generated content platforms and been envious of their cost structure. YouTube barely pays any money for its content and it's destroying this industry.

• 35:51Speaker 00

  YouTube pays the most. YouTube pays 55%. Everyone else pays, everyone else pays zero.

• 35:56Speaker 01

  Right.

• 35:57Speaker 00

  Pays zero percent.

• 35:58Speaker 01

  But yeah, but like it for an average creator on Tik, on YouTube, you're getting effectively nothing.

• 36:03Speaker 00

  It is a great business model and the Reels TikTok business model is much better than the YouTube one because they pay zero percent for it.

• 36:09Speaker 01

  There's something there. Disney has made some noise about putting creator video in Disney plus. They've all looked at it. They've all talked about it. This one seems easy, right? It's HBO Max plus your favorite commentary about whatever HBO Max show you're watching sourced directly from TikTok right here. We're all going to integrate it. Maybe this is way harder than I'm making it sound.

• 36:30Speaker 00

  I think they all believe that, like, so they're all, they all move in herds, right? All these companies always do. We're all doing vertical video now. You're like, well, vertical video, yes, people like the format. What they really like is unlimited free content, which again, TikTok doesn't pay anything for. So you Paramount or you Peacock or you Disney, you are not in the business of getting free content from people. You are still paying for stuff. And also you care about your brand still. So you don't want to just have a platform where anyone can watch anything. And I think that is kind of the fundamental question for all these media companies is you're not platforms. The dominant media companies are platforms. Can you turn yourself into a platform?

• 37:13Speaker 00

  Should you turn yourself into a platform? Should you just say, nope, what we make is super high quality, specific stuff that people value as a brand. And, and maybe that's just going to be our place and we're, we're not going to compete with the, the Youtubes of the world, which Netflix seems to be going in that direction. They're going to be more platformy. I do think you'll probably see Paramount, but every company tried to say, oh, we're a platform too. I don't think it will be successful though.

• 37:37Speaker 01

  Do you foresee a tighter connection between Skydance and TikTok? Right. These are all companies operated by a family. They're not close right now. They could get closer.

• 37:50Speaker 00

  I don't know that TikTok cares, right? TikTok, which is still really run by ByteDance. I don't know that they care about making Larry Ellison that much happier. I, I don't think that's the direction of travel here.

• 38:01Speaker 01

  I'm, I'm only curious because I'm watching Meta just relentlessly promote Muse across all of its platforms. It's an AI agent and, you know, OpenAI launches Dots and where do they go buy ads? They go buy ads on Meta platforms. And like, this is a massive structural advantage for Meta, right? They are not buying their own ad space. And if I ran a movie studio and I had to put out 30 movies a year and pay to market them to try to get these kids to go to a theater, I'd be like, boy, I could really use that TikTok juice.

• 38:29Speaker 00

  Do you know who's winning the micro drama wars in the US? I don't know if you've paid attention to micro dramas yet, but they are what they sound like. Meta, Meta is not in the micro drama business. Meta is in the, oh, you want to advertise micro dramas? Come talk to us. So they are getting all of the micro drama money right now. It's a great place to be if you're, if you're Meta. And by the way, the micro drama companies are uploading their content to Meta as ads. So Meta both gets paid for the advertising and then has free engaging content that it can show its users. It's, it's a great place to be.

• 39:01Speaker 01

  If only Meta cared about its actual businesses instead of trying to win an AI agents. Though you would, the, the amount that they would succeed would be out of control. That is another, that's another episode of the show. Let me end with the conspiracy theory that I brought up at the beginning. There was a bidding process. David Zaslove, and his initial plan was to split Discovery into two, to sell the cable networks to whoever was dumb enough to buy them. Netflix really wanted Warner and they, they bid, they were actually the announced winners until David Ellison did his regulatory arbitrage.

• 39:32Speaker 00

  They won the deal December of last year. They gave up on it February of this year. So they, they, they won for a couple of months.

• 39:38Speaker 01

  David, he is very good at, at just kicking the door back open. He, he, he made it happen.

• 39:43Speaker 00

  As Logan Roy said, congratulations, you, you, you paid the most. You said the biggest number, I think is the line.

• 39:50Speaker 01

  No one has succeeded in buying Warner. You could argue that Netflix did nothing but make the price so high that it was unsustainable, that they had to create massive amounts of leverage on this deal, pay an unsustainable amount of debt. And at the end of this all, Ted Sarandos is going to be standing there, waiting to buy yet again, the distressed assets of Warner Brothers at a fire sale price. Do you think that's likely?

• 40:11Speaker 00

  I think Netflix, and other people as well, will definitely be in the business of, oh, Enon Krees fired you, Enon Krees had a, told you you couldn't make your movie or television show, come talk to us. Which, by the way, a lot of other companies were doing to Netflix back in 2022, when Netflix went through its retrenchment. So I think that is likely, but also standard, right? You just have this turmoil, you have, you know, a standard thing in any media companies, oh, this project, this other guy brought in, we're not doing that anymore. That was a failure, we're doing new stuff. And, oh, by the way, if the last guy's project turns out to be successful, we'll take credit for that, but we're going to bring in new stuff. I don't think Ted Sarandos was playing 3D,

• 40:56Speaker 00

  4D chess here. I think they thought this was a good idea. I think the much more obvious answer is Wall Street hated the idea. Wall Street kept telling Netflix, we hate this, we hate this, please don't spend $80 billion on this. And also, by the way, you're going to have a tough time getting this through regulation. And I think Ted Sarandos eventually said, okay, you're right. I've seen him speak publicly about this and in other venues, he seems quite upset about the fact that he didn't get this deal. I think there's also now feelings involved here, but I don't think this was all a master plan on their part. I think they went for it, they didn't get it, they're bummed out, they're going to move on.

• 41:39Speaker 01

  I think an angry, aggressive Netflix might actually be the best thing that could happen to Hollywood right now, because they were headed towards their own vertical video slop fest, and maybe now they're not going to do that.

• 41:49Speaker 00

  I think that's the question for, I mean, it's a question everybody, but for Netflix is, you guys have been super successful for a couple decades by doing one thing. Well, initially, you were doing DVD with my nail, then you went to streaming, that's all you did. And you didn't ever sell movies, you didn't do à la carte stuff, you didn't do advertising, you didn't do sports. Now you do advertising, now you do sports, now you're doing games, now you're doing podcasts, maybe you're going to integrate with other kinds of TV stuff. And so this laser focus that Netflix had that proved very successful, they are moving away from, they may have to move away from, they may have sort of reached the limit of that growth, but it gets trickier and trickier the more things you add to that stack to make sure you're doing a good job. And I think that is the real challenge for them.

• 42:31Speaker 01

  We've been at it for about 45 minutes. I still don't know how David Ellison is going to make one more dollar than he made last year. Have you come to any conclusions?

• 42:39Speaker 00

  We're recording this Tuesday morning, Tuesday night, like at 7:30? I don't know why they're doing it 7:30 or 8:30. They're going to have a press conference, the first press, Skydance press conference. So if we rerecord this on Wednesday, maybe all this will be answered, but maybe it won't be answered.

• 42:52Speaker 01

  Well, Enon will be there. He'll be, he'll be there wielding his scythe.

• 42:56Speaker 00

  It's going to be interesting, because he is not going to be a high profile person, but I think a lot of people are going to learn his name anyway, I think. And this is a thing that Hollywood does, right? You, you find a person to blame for your troubles. Sometimes it's a company, like Netflix, sometimes it's an evil Jason Kylar, remember when he was running Warner Media for a minute or two, and everyone said, you're wrecking the business? Thank God we have David Zaslove, who's a, who's an authentic media guy to come in and save us. And then that, you know, six months later, David Zaslove's name is an epithet. Presumably, there'll be a new epithet associated with this company.

• 43:30Speaker 01

  Well, this deal is gonna, it's gonna wind its way through. We're gonna, we're gonna check it out a lot. We're gonna have you back, Peter. Thank you so much for being on Decoder.

• 43:36Speaker 00

  See you, Neil. Thanks.

• 43:37Speaker 01

  I'd like to thank Peter for joining me, and thank you for listening to Decoder. To get new episodes every Monday and Thursday, subscribe to our YouTube channel at DecoderPod, and find us on TikTok and Instagram under at DecoderPod for more fun stuff we put out almost every day. If you enjoyed this episode, please send a link to it to someone you think you might like it. It really helps us grow the show. You can also subscribe wherever you get your podcasts. Decoder is production of The Verge and part of the Vox Media Podcast Network. The show's producers are Greg Ott, Kate Cox, and Nick Statt. This episode was edited by Ursa Wright. Our editorial director is Kevin McShane. The Decoder music is by Breakmaster Cylinder. We'll see you next time.