What Paramount Skydance (PSKY) Gains From Buying Warner Bros. Discovery (WBD)

0:00it's time now for our 360 round for that. Let's bring in our panel to discuss the latest in the Warner Brothers Discovery sale, which all of you know is one of my favorite sagas that feels less dramatic these days. But Matt Jolgen, Senior Equity Analyst at Morningstar and Kenneth Such, Chief Strategy Officer at Nexon joining us to take a closer look. Matt, let's start with you here. You know, we've got this $31 per share deal paramount emerging as the victor Netflix exiting the process after originally being the winning bid here. From your viewpoint, does paramount skydance winning fundamentally change the media landscape here? Or is this more about a survival play for legacy media? Well, can it be both? I think that this enhances the survival and survival might be too strong of a word, but it probably immense Warner Brothers Discovery and paramount when they're together as legitimate competitors at the top, you know, top tier

1:01streaming competitors for subscription streaming. And so that changes the outlook for these companies, and I think makes it a little bit easier for them when they're together. As far as whether it changes the overall landscape, Netflix should still dominate. We don't think these are going to, you know, be nearly as close to that. Disney Amazon, they remain ahead, but it seems like we now have a legitimate fourth survivor that might have been more in question before. But as far as the industry overall, not too much different, but for these companies, much different, and for consumers, maybe a little bit more simplified and fewer subscriptions to be able to have more of the content that they want. And Kenneth, you brought up a really good point in your notes. We've been having so much conversation about the library and the IP that comes with this deal, but you say that it's just as much an advertising and data play as well as the content deal here. Walk us through what that actually means for Paramount. Yeah, it's going to be super interesting to see

2:01how much they lean into the Oracle infrastructure. I know Oracle. We just talked about it on your show continues to invest heavily in AI capabilities, cloud infrastructure, data management, and that data pool has just gotten a lot more powerful for Paramount by acquiring Warner Brothers Discovery. So that data source being proprietary, being very strong, can now enhance the capabilities for advertisers who want to reach a greater audience, which much stronger tools. And Matt, I saw your note that you put out after Paramount's guidance was the victor in this ongoing Hollywood saga that was this acquisition deal because of the certainty for cash for Warner Brothers shareholders versus a more complicated structure. But I saw some interesting reporting from the financial times today that I want to get your thoughts on that a significant amount of the money in this deal is actually coming from Middle Eastern sovereign wealth funds. And with this now ongoing situation in the Middle East, financial times is saying that there are ongoing conversations about how the war

3:02is already starting to hurt the pockets of some of these investors who were involved in this deal. Do you have any concerns about the potential pulling out in terms of that funding or any complications to the package that was approved? Not too many in large part because the Ellicins have backed up the equity here. And so if they're not able to get as much from their partners, I think more should fall to them and things should proceed in that case. As you guys were talking about earlier and again just now, I do think Oracle is important in this story not only in getting the deal approved but in the in the future of Paramount and Oracle stock price is important as far as the resources that the Ellicins will have. They're going to be huge owners of this company. They're going to own most of the equity along with to some extent their Middle Eastern partners if that does go through. So we don't think there's an issue in being able to access the funds for the equity right now. And as far as how much the Middle Eastern

4:03countries are involved, we don't really even know that for sure when this deal was announced that Paramount was the winner, they were pretty quiet on what level of funding the Middle Eastern countries were still putting in and you know, if they were, but to us, it's the Ellicins side of it. It's going to be the most important for the equity. And kind of last question to you and we've had a lot of conversation about creating a streaming competitor to Netflix this combination of Paramount and HBO Max and the HBO network, but sports is also a big component here as well. And David Ellicin, when he was doing the Peace Guy merger, made no secret of how he wants as many sports under their umbrella as possible. How big and how important is that component to the acquisition itself and the broadly created conglomerate that they're making and also to that advertising strategy that you pointed out. Yeah, life sports is really the last example of appointment

5:03viewing. It's something that everyone still tunes in when it's actually happening. Paramount has invested an enormous amount in securing a number of sports rights including the year for Champions League, PGA to a golf as well as the NFL on CBS. We know that sports is a big deal for not just Paramount, but also Netflix and all the other companies that are really trying to get your eyeballs to their streaming platforms. So we do believe this is going to be big and we see this with necks and sports as well. It's one of those most sold packages within the necks and family. All right, well Paramount's guidance not having a great day today, down a little bit more than five percent, but Warner Bros. discovery today up marginally. I want to thank you both for taking a closer look at this deal. I'm sure it certainly won't be the last time we talk about it as we now have to get through all these regulatory hurdles, but Matt Dolgan, senior equity analyst at Morningstar and Kennet's chief strategy officer at Nexon.