Subscribe
Share
Share
Embed
Technology's daily show (formerly the Technology Brothers Podcast). Streaming live on X and YouTube from 11 - 2 PM PST Monday - Friday. Available on X, Apple, Spotify, and YouTube.
We are live again from the New York Stock Exchange. Thank you for the boats, Hound Jookie. Let me give you some facts about Netflix. They're gonna buy Warner Brothers and HBO Max for an $82,700,000,000 deal. The acquisition is expected to close following Warner Brothers Discovery spin off of Discovery Global TV Networks division in q three twenty twenty six.
Speaker 1:There's a bunch of fun, interesting things hitting the timeline. Obviously, this is a tech story because of Netflix.
Speaker 2:And it is a story that we we will be talking about for quite a while because Yes. Although, or although this has gotten announced, in the last twenty four hours, it's very likely that this is gonna be a
Speaker 1:very long, drawn out process before it actually gets regulatory approval. So it's official. In a move that will dramatically reshape the entertainment business, Netflix and Warner Brothers or WB, don't call it Warner Bros, although we we want to. The insiders, they call it Warner Brothers or WB. Warner Brothers Discovery announced an agreement Friday under which Netflix will acquire Warner Brothers, including its film and TV studios, HBO Max and HBO.
Speaker 1:The deal has total enterprise value, including debt of 82,700,000,000.0 with an equity value of 72,000,000,000, the company said. The announcement of Netflix's deal to buy the Warner Brothers streaming and studio business came after a a weeks long bidding war that pitted the streaming giant against David Ellison's Paramount Skydance. And Comcast didn't Netflix's stock trade down on this news.
Speaker 2:But Some people are excited about it. Yeah. Some people are plenty of people are not excited about it for various reasons. Some people don't think, it'll get, proved. Other people think this is you know, it's quite an extension.
Speaker 2:W b obviously does theatrical releases. They have a movie theater business. It's not, it definitely will be an ex quite an extension Mhmm. To Netflix's core business today.
Speaker 1:So Netflix said it expects to, quote, maintain Warner Brothers. The company has historically been more of a builder than a buyer, and so Netflix is trying to, like, sort of reassure both fans, employees, even people who might just see Warner Brothers Discovery as, like, a fantastic asset that doesn't need to be, like, stripped for parts. He's trying to push back against a potential narrative that Netflix will will be very ruthless and cost cutting and and lose some of that, you know, what people think made WB amazing art. So he said, Netflix expects to maintain Warner Brothers' current operations and build on its strengths, including theatrical releases for films. I know this doesn't matter to you because you never go to the theater and you never
Speaker 2:see We went and saw Dune. We got
Speaker 1:That was, like, two years ago.
Speaker 2:But we got a we we got a when we did that, it was a lot of fun. We got a bunch of the guys we got a bunch of the guys together. We said we're gonna make the monthly thing.
Speaker 1:Yeah. We were close done in six. The at the start of the year, we were doing that. We were doing that. We were getting everyone together, just like guys night out kind of, but to the movie theater.
Speaker 1:Because we were like, okay. What do you do if you're a guy and you have a bunch of guy friends and you wanna, you know, go meet up, but you don't really like drinking? You don't know anything about sports? Like, what can you do on a Tuesday night?
Speaker 2:Just suit up and head to your local movie theater.
Speaker 1:Head to the local movie theater. I mean, the reality is that theaters are going to change. They are that, like, the it there's a question of, like, you know, fast takeoff in AI, fast takeoff in streaming. Like, it's been twenty years since you've been able to watch things on the Internet, so you've been able to watch, home box office was a way to watch a movie at home. In some ways, the ability to put a TV in someone's house was the beginning of the end for the theater.
Speaker 1:They were immediately substitutes, although the difference was massive screen versus tiny CRT. And then it was like, okay. A 42 inch TV, flat screen. Now that might cost a couple grand, and it was like a serious expense. It was a couple grand.
Speaker 1:Now they're practically giving them away. And so, of course, that's gonna be a competitive pressure, but, also, it's not gonna destroy the theater immediately, but it's going to have an erosion effect over decades, and that's exactly what's happening. But it's nice that Netflix is not declaring this the end of the theater. They're gonna continue to invest in support. And so Netflix signaled it would keep HBO Max as a discrete service while it also touted the addition of HBO and HBO Max content to its lineup.
Speaker 1:And so we're gonna add the deep film and TV libraries and HBO to and HBO Max programming. Netflix members will have even more high quality
Speaker 2:called Netflix Mac.
Speaker 1:You need to be Netflix maxing. The article goes on. This allows Netflix to optimize plans for consumers, enhancing viewing options, and expanding access to content. Netflix says they expect to see 2 to $3,000,000,000 in cost savings annually by the third year after the Warner Brothers Discovery deal closes.
Speaker 2:This is from Martin Pearce. He says Netflix's Warner purchase is an $82,700,000,000 blunder.
Speaker 1:He's calling it a blunder.
Speaker 2:He says it will likely announced Friday morning will likely prove a stupendous error by a management team that until now has really put a wrong foot. Netflix paying a huge price, 27 and a half times next year's expected earnings well above prevailing multiples for film and TV companies for businesses that likely won't help it add many subscribers. Right? Martin continues, moreover, the deal is likely to face severe regulatory obstacles. Yeah.
Speaker 2:So Again, so Netflix is not exactly, Trump aligned. Mhmm. Right? They Netflix did the deal, with the Obamas. Yeah.
Speaker 2:And so I think that in a world where WB is going to Paramount, I could see that much more likely to to get through. Whereas this Yeah. This is gonna make make sure the the Netflix, like, team is gonna be spending, like, at least the next year, I would assume, working on this.
Speaker 1:Yeah. I mean, it it feels like it's so hard to make the case that this creates some sort of monopoly because Disney owns it's like, yes. Okay. Now Netflix has Okay. That's it.
Speaker 1:They also have Batman. But
Speaker 2:Jason Kilar, who's a former WarnerMedia CEO, says, if I were tasked with doing so, I could not think of a more effective way to reduce competition in Hollywood than selling WBD to Netflix. Ben Wise Right. Says, disagree. Hollywood is competing with Silicon Valley, Apple, Amazon, Google, Meta, preserving some notion of competition in and between legacy Hollywood, risk winning a battle and losing a war that old media companies need to Mhmm. More of the right type of scale.
Speaker 2:This does it for WB. Jason says, when I use that phrase competition in Hollywood, I'm referring to having a sufficient number of vibrant and robust entities that can and will aggressively compete against each other to produce and distribute films
Speaker 1:Okay.
Speaker 2:Series, live events, and more for decades to come. I'm not focused on the legacy of it all.
Speaker 1:I I mean, it might be high, but just in terms of, like, Hollywood filmmaking, these feel like extremely competitive areas. There are so many different there are so many different streaming services and and and bundles that you can piece together. There are folks who are like, yeah. You know what? I order from Amazon, so I have Amazon Prime.
Speaker 1:That's where I watch everything. There are still people that just go to Apple, you know, Apple TV and just buy a movie. You know, you can still just do that. You can be over off in the Netflix ecosystem. You can be in the Hulu ecosystem.
Speaker 1:Like, there it it doesn't feel like there's a a a crazy lack of competition in media right now. I would be somewhat surprised if this doesn't if this doesn't go through, but, I mean, you never know.
Speaker 2:I don't know. I think Netflix again, we're we're before this, we're having lunch with cable exec, and he was kind of bringing up how Netflix had gotten caught up a little bit in kind of some of the the the woke stuff. Sure. And again, I just think in in a in Trump America, I just feel far more likely Mhmm. That the Allisons could get a deal done, and they're notoriously absolute dogs.
Speaker 1:Yeah. There's rumors they're gonna go that they're gonna, like Oh, so yes. Yes. They're gonna try and outbid.
Speaker 2:Right? So right now, this is Yeah. What's Chris Gasperini over at at Fox says, Scoop, as reported, Paramount and Skydance Skydance is now looking to launch a hostile bid for WBD because it feels its $30 a share all cash offer is actually higher than what Netflix offered in terms of cash stock and the value of the spin off of the cable business. So this is still developing.
Speaker 1:Before Netflix IPO ed in 2002, apparently Bezos offered $12,000,000 to buy it. Can you imagine if Netflix had sold for 12,000,000,000?
Speaker 2:Well, they also tried to sell the Blockbuster during the
Speaker 1:So Blockbuster had a chance to buy it for 50,000,000, and they laughed it off. But then it was just a DVD delivery service, and they were like, we can build this. We have DVDs. We all the infrastructure. We can just take it from the stores.
Speaker 1:Like, we don't need to do this. But what they didn't realize was that actually building technology, actually building a real tech, like, streaming service and scaling that platform, mean, I Netflix has some of the greatest, like, just infrastructure
Speaker 2:even the early recommendation engines. Yeah. It's like I I remember my I remember my dad being like, yeah. Netflix just recommended it knows what I like, and it just said it sent me this. They said you're gonna enjoy this.
Speaker 1:You're you were making the point that putting Netflix and and and Warner Brothers together, it doesn't like, everyone's already subscribed to Netflix. I don't know if that's true. If the if the trends continue. Like, Netflix has a fair amount of, like like, they have their Squid Games. They have some big they have some big IP.
Speaker 1:But if you just think about, like, the drumbeat of HBO come back every season, oh, not watching Game of Thrones? You're out of the loop. Oh, you're not watching Succession? You're out of the loop. Like, the conversation driving shows, I feel like are on HBO much more consistently than Netflix.
Speaker 1:And in fact, I don't even know if I'm logged into Netflix on my phone right now.
Speaker 2:So you're you're a true enthusiast. For me, as somebody who's not an enthusiast Yeah. I'll go to Prime because I'm like, I rarely watch movies. If I'm gonna watch a movie, I wanna just I'll I'm happy to just buy. I'm not, like, going I do the same thing on Let get the let me get the free option Sure.
Speaker 2:Sure. I will just buy
Speaker 1:Sure. Sure.
Speaker 2:Sure. The the thing that I wanna fill this ninety minutes with. Yeah. Anyway, so But HBO's doesn't include WDD WBD's cable channels such as CNN, TNT, TBS, and Discovery
Speaker 1:I'm gonna spin that out.
Speaker 2:Which are being spun off.
Speaker 1:Okay. Delay that.
Speaker 2:Even if Netflix gets regulatory approval, it will have to take on 50,000,000,000 in debt to complete the deal, and we'll spend a couple of years cutting costs to reduce that debt. Netflix does do around $10.09 or 10,000,000,000 of free cash flow. Yeah. And so they can certainly service the debt. Yep.
Speaker 2:Anyways, in the first nine months of this year, WBD's studio and streaming operations generated 2,300,000,000.0 in earnings. Next year, Netflix executives said they expected the Warner business to generate 3,000,000,000 in That's a price of 27 and a half times EBITDA. Netflix says the deal value represents a multiple of 14.3 times. WBD's traditional rivals, Disney and Paramount Skydance, are each trading around 11 times.
Speaker 1:Mhmm. Kramer said, so out of the box. Netflix as the world's biggest content creator by far, exciting, but not necessarily in a good way for shareholders. I think that's so funny. I don't think people realize the licensing business Netflix is about to have if this deal goes through.
Speaker 1:Warner Brothers animated IP library alone would bring in billions in new merchandising revenue coupled with new versions of these iconic shows on the platform. Game over. And he list some of these out, and one of them, think, is hilarious is Foghorn Leghorn. They own Looney Tunes. So they have Bugs Bunny, Daffy Duck, Porky Pig, Sylvester, Roadrunner, Wile E.
Speaker 1:Coyote. These are, yeah, these are these are time honored iconic iconic characters. I just think it's funny because very clearly, there are a series of bankers out there that have a spreadsheet, and somewhere they have a row. And on that row is Foghorn Leghorn, and attached to Foghorn Leghorn is the value of the intellectual property of Foghorn Leghorn, who's like a large rooster who talks with a funny accent. And I just imagine that they're out there saying, yeah, Foghorn Leghorn.
Speaker 1:That's, like, 30,000,000. That's a $30,000,000 business. Like, Porgy Pig? Porgy Pig's 80,000,000. Well, let's do a sum of the parts.
Speaker 1:What about Snagglepuss?
Speaker 2:I don't even know.
Speaker 1:I thought you were making some of No. This is part of the HanBarbera.
Speaker 2:Okay. So so Polymarket has who will acquire WB at Yes. 86% today. Paramount is still only sitting at 6%. Mike Miraflores says we already have nana Nano Banana Pro TVC commercials with decent paid media budgets behind them.
Speaker 2:Everything is moving so, so quickly.
Speaker 1:Okay.
Speaker 2:So James Harden is in an ad for MyPrize. Mhmm. I don't know what MyPrize is. Said this is the best commercial he's ever been in, and he never stepped foot on the set. Let me show you how to crack the code on celeb deepfakes for this My Prize ad we did with James Harden.
Speaker 2:So this is a guy named Billy Woodward Yeah. Who's been doing
Speaker 1:they're actually putting behind this ad on TV because it looks like a TV commercial, but this also could just be a viral marketing campaign on
Speaker 2:Wow. My prize is a premium online casino games. Wow. Games.
Speaker 1:It's hard
Speaker 2:to get
Speaker 1:in on the the gambling trade.
Speaker 2:There's a very viral post right now that says breaking. President Trump's set to announce a new AI platform called truth AI. There's not a single not a single, legacy media institution has reported on this that I've found. So I would given that this is a story that they'd be very excited to cover Yep. I would be wary that it's real yet.
Speaker 2:That's right. That's not stopping Jay Bull, t a r t, from saying and you guys think Google won the AI race talking about how Trump is set to unveil new AI platform Truth AI.
Speaker 1:You know what you know what the crazy thing is? Like, I keep laughing about this fact that, like, it has gotta be so hard to justify an in house AI foundation model training run now if you're a big platform when the rebuttal has to be okay. So you're saying that you need to do something special. You need to do something creative. You need to do some weird deal with some other people, put something together, but Apple can just work with Google.
Speaker 1:Yeah. It it it's enough for Apple to Apple gets to work Google.
Speaker 2:For
Speaker 1:you. Apple works to just buy tokens from Gemini from Google, but you
Speaker 2:With the ability.
Speaker 1:Your business is more more special
Speaker 2:with Apple. I think Apple is in the position where, like, they're like, we don't need to prove to like, I feel like an analyst can look at Apple and say, like, they will have leverage in AI.
Speaker 1:Yes. At least Yeah. Yeah. This is
Speaker 2:the details. Where there's other businesses that feel like, okay. We need an AI strategy.
Speaker 1:It's not
Speaker 2:enough to just announce a partnership with a lab. Yes. Yes. We need to, like, actually own the weights.
Speaker 1:Yeah. Yeah. Yeah. The The Wall Street Journal is saying that Apple departures point to challenges for iPhone's dominance, and I'm I think it's too early to call the the iPhone challenged. I I feel like the iPhone's dominance Yeah.
Speaker 1:Has not been challenged yet. Maybe that is coming. You know, there have been several top lieutenants who have left in the past twelve months. Apple is facing a wave of executive departures as the company continues a period of transition, not only among its leadership, but if rivals have their way for its businesses as well. On Thursday, the company announced that its general counsel and head of policy will both retire next year.
Speaker 1:On Wednesday, a top designer left for Meta Platforms. On Monday, Apple said its head of artificial intelligence strategy would retire. Its chief operating officer announced its retirement in July, and the CFO has transitioned into a new role. Are the heads rolling, or are these retirements? There's a lot of, like, you know, sort of management.
Speaker 1:It feels like Apple's just, like, not the place to let the drama kind of come to them.
Speaker 2:Apple was overdue for a full executive reset. Just need to add Cook to the list. And for a replacement, Forestall is only 56. Time for a comeback?
Speaker 1:Oh. Oh, that'd be very interesting. Yeah. There's a of Forestall fans out there who think that he didn't get it he didn't get it right or he didn't get the the opportunity he deserved.
Speaker 2:Cook can't catch a break. He's like, I still
Speaker 1:think I still think Cook's done a lot of good good stuff. I'm still I'm still bullish on Cook. The executive departures underscore a changing of the guard underway at Apple. Even as executive, chief executive officer Tim Cook himself shows no sign of stepping down even though everyone is leaking a variety of rumors to the contrary. Cook and his new lieutenants face a critical test preparing Apple for the AI era and a wave of new competitive devices that result.
Speaker 2:SpaceX tells investors it's aiming for a late twenty twenty six IPO. Apparently, Elon Musk, SpaceX has told investors and financial, institutions that it is aiming for an IPO in the second half of next year. Mhmm. The talk comes as SpaceX considers holding a sale of shares held by investors and employees that would value the company at 800,000,000,000. Quite the markup.
Speaker 2:Double its valuation in a sale this summer, and what would make it the most valuable private company, he's gotta be the most valuable private company. It probably, candidly makes him sick that that OpenAI has briefly left. Eclipse. Mark Benioff is saying that he might rename the company Agent Force. Yeah.
Speaker 2:Trace Cohen says just Force. Why not just force?
Speaker 1:Oh, force. Well, isn't there a, isn't there force India, the f one team from a couple years ago? BYT or b w t, force India? That was like a team.
Speaker 2:Benioff is is on a tear. His his pinned tweet right now, LLMs are the new disk drives. Commodity infrastructure, you hot swap for whoever's cheapest and best. The fantasy that the model is a moat just expired.
Speaker 1:People are really going wild.
Speaker 2:They're going off down here. Why not just sales? I like just sales. Just be sales, Inc.
Speaker 1:Ticket. I don't think you can be. I I think that's too generic.
Speaker 2:I don't know.
Speaker 1:Not a word. You do?
Speaker 2:I mean, he he would have to update the the ticker too. Is bigger one. F it. Nothing else is working. Go for it, brother.
Speaker 1:A name change sometimes will fix you.
Speaker 2:For anyone who doesn't understand, Cursor processes more tokens than Salesforce all time figure every six days. Every six has 20,000,000 users. Yep. I mean, CreditCursor has a similar amount of users, I think. Sure.
Speaker 2:Assuming same average token count per active agent force user count is 40 to 60,000 truly active users, a k a point two to point 3% adoption three years after launch.
Speaker 1:Like, all tokens are not created equal. Like, you can you can generate so many so many tokens if you're doing these, like, deep research reports. And, like, if you had agent force going around and base effectively running a deep research report on every contact in every CRM under, like, under
Speaker 2:Every conversation. Every conversation. You get a new email from a
Speaker 1:lead. Right? Like, the the the token generation could be incredibly high and also deliver very little value. On the flip side, you could have a really fine tuned model that is, you know, laser focused, more of scalpel. Yeah.
Speaker 1:And you're gonna be getting a lot of value out of those tokens that you are generating. So I don't I don't really know.
Speaker 2:Logan Paul, Jake Paul, and Jeff Wu are starting an eight week accelerator. It's a 25 k safe followed by a $100,000 price round
Speaker 1:for a
Speaker 2:total of 7% equity. A lot of people are confused about doing it as a price round for a 100 k. A founder could easily end up spending, like, $30, you know, like Yeah. Depending on depending on who their lawyer is, like, There actually is tricky. A 100 k investment, and then you have, like let's assume you're, like, super efficient, and it's, like, $10.
Speaker 2:It's, like
Speaker 1:Yeah. Is that
Speaker 2:It's kind of annoying. And then yeah. It's it's it's it's annoying. That said, I think there's a lot of interesting businesses that could go through this that would really benefit from working with Jake and and Logan and Jeff.
Speaker 1:Right? So interesting that it's a 25 feet safe and then a $100,000 price around. Like, why not just one twenty five for 7%, like, a on a on a safe with a cap that ensures they get 7% no matter what? Like, that feel I would love to talk to them. I I think, hopefully, we're gonna be able to get Jeff Wu on the show at some point.
Speaker 1:We can ask him about how he is, you know, thinking about that particular term. Oh, 7% for a 125 k. That's low, and that's certainly lower than YC. YC, you come in with, like, I think, a $10,000,000 valuation. This is more like a $1,000,000 valuation.
Speaker 1:But, you know, if you're an earlier in your career, you're not ready to go to a different higher valuation, like, this could still be a good Or
Speaker 2:you don't need a lot of capital for your business, but you do need a lot of attention. Like, I could see some consumer brands getting started this way.
Speaker 1:No. I I I mean, I just remember, like like, YC was my North Star for, like, what I wanted to get into with my first business, but, like, I got denied the first time I applied. And I was like, if you gave me $5,000 for 10% of the business, like, I would take it because I want to work on my thing, and I wanna keep going. And, like, yes, it's at some point, it can be predatory, but, like, with some of the first ideas that I was coming up with, like, I definitely didn't deserve a 125 k for 7% because they were, like, slop companies that were, like, very unlikely to win to to succeed. So I do wonder if they will position this as, okay.
Speaker 1:You're you're you're going to be able to accelerate on the go to market side. You're gonna be able to accelerate on the on the creator side, creator partnerships. This will be I there's a whole bunch of different ways. It could be something where you are work you're you're going through this accelerator because you get to ask Logan and Jake about their media creation, their creator work, and then you're you're launching your company Yeah. More likely to go viral because these guys really understand virality.
Speaker 1:On the other side, it could be you're coming in and you're taking a crack at building something that might wind up being more like an incubation for them.
Speaker 2:The remaining remaining Apple leadership team. Who is this? Travis Scott, Tim Cook. And mister Beast? Mister
Speaker 1:Beast, of did say that he's going to film on iPhones. I'm not sure what the Travis Scott connection is. Has he done a partnership with Apple in
Speaker 2:one of It's just
Speaker 1:No. There are still plenty of folks. Eddie Q is still there. The the Apple leadership team is still stacked. Don't you worry.
Speaker 1:Don't you worry.
Speaker 2:Apparently, OpenAI must turn over 20,000,000 chat logs to plaintiffs. Okay. Judge Ona Wang has ruled.
Speaker 1:Yeah. You have to send an email to a to a server that adds a ChatGPT response in with your lawyer cc'd. That's how you maintain confidentiality.
Speaker 2:Harvey, who Keith also mentioned
Speaker 1:Yes.
Speaker 2:Raised a 160,000,000 at a $8,000,000,000 valuation.
Speaker 1:This is why Keith was talking
Speaker 2:about dilution round Wow. From a 16 c. I mean They three x revenue this year to a 150,000,000. Yeah. They raised 300,000,000 from Sequoia at 3,000,000,000 in January, 300,000,000 at 5,000,000,000 from Kotu and KP in June.
Speaker 2:And then a 160. And then 160 at eight from a 16. Out to Spencer and the boys at at Kotu for a little markup there.
Speaker 1:And I feel like I feel like got to be pretty discerning on making this purchase decision at this point. Like, it's not it's not entirely exploratory budget anymore, and it's not viral, like, something that's like, oh, it's like a flash in the pan, and then all of a sudden, like, they're not gonna be able
Speaker 2:to monetize. Yeah. My anybody that wants to say, like, oh, this is, like, out of control, it's like, do you think they'll be able to get to, like, $81,000,000,000 of revenue?
Speaker 1:Legal industry is pretty big, and and it's been traditionally pretty hard.
Speaker 2:They actually they actually so so the labor displacement thing does feel real here because I do think a law firm would say, hey. Currently, have a 100 associates. Yeah. We can condense that down to about 20 and do the same amount of work by working with Yeah. With something like Harvey.
Speaker 2:And again, the the vibe had had, at least, with a lawyer buddy of mine, had shifted drastically with Harvey Yeah. A year ago. He was saying, we're, like, using it a little bit now. He's like, it's one shotting stuff Yeah. That I didn't think it would.
Speaker 1:Says, I'm I'm one shot it actually by it.
Speaker 2:I'm one shot thank you for tuning in with us today and yesterday from the nice seat, and we will be back here soon.
Speaker 1:We'll see you on Monday.
Speaker 2:Cheers. Thank you.