The ongoing saga that is the chase for WarnerBros continues.
Paramount (Skydance) and Netflix are both chomping at the bit to get a hold of it. The former, led by David Ellison is looking to become one of the largest studios, competing with Disney. Netflix, on the other hand, would add one of the most valuable libraries to its portfolio, theoretically increasing the appeal to subscribers.
We are now looking at a bid of around $108 billion for the company. Now we have news that shareholders have leaked their desire for the Paramount bid.
Of course, there are many layers to this situation. Let's look at some of what is taking place.
The offer by Paramount is for the legacy broadcast channels. Here is where it differs from Netflix which made an offer excluding the global network channels. This is one factor for the shareholders to consider.
It is also where I question the long term viability of this pursuit. I do not profess to be a media expert. However, the decline of legacy assets such as these is evident.
Comcast rolled out its legacy networks, including MSNBC (MSNOW). The stock went live and hasn't done well. Here is a chart of the activity:
This was a drop from $46.65 to the present level. Does it stand to reason that the WarnerBros properties will follow a similar trend?
We saw many of the studios take large write downs a little over a year ago as the market repriced these assets. Right now the market cap for Versant is under $5 billion.
The Netflix offer would allow WarnerBros to either sell off the traditional networks or keep them under that umbrella. Here is where I see a challenge.
With each passing day, these assets might be declining. In other words, the longer this goes on, the less the legacy piece is worth.
Naturally, the Paramount group doesn't care. They are looking at becoming one of two major studios alongside Disney.
Again, is this worth it?
All of this is a mess.
One key piece is that regulatory approval is required. As political split as the US is, here is where both sides were brought together.
Nobody would claim Donald Trump and Elizabeth Warren are aligned politically. Yet, on this one, they both agree: they are against Netflix taking over.
The Ellisons are not politically aligned with most of Hollywood. Here is another example of strange bedfellows.
Actors and actresses are for Paramount. Netflix is likely to kill the theater business. After all, it is a streaming company. Why would it bother with theater release?
This is a problem for those who get royalties. The situation with streaming is already a dogfight, with platforms being accused of manipulating the numbers. It affects the payouts that are given.
We do not see this problem with box office tickets. That is still evident, and paid accordingly. Hence, Hollywood is against Netflix.
Ultimately, Paramount is going to win as it has, by far, the best offer. The board can try to push things towards Netflix but the deal is clear. Shareholders, ultimately, care about the money they are receiving. That means their vote will go to the company that fulfills that need.
In spite of the maneuvering, at this point, it is the Paramount bid. As for the winner, is the overpay really worth it?
When it comes to the legacy channels, not likely. That said, it can still milk whatever value is still there, hoping to pull some of the value away from Disney and Versant.
They better move quick.
