CNN One Thing

Welcome back to one thing. I'm David Rind and Netflix wants to buy Warner Brothers. So does Paramount and President Donald Trump is right in the middle.

What the president is saying right there is that's nice, that tastes okay. I want more

How we could all feel the impact of a Hollywood overhaul. After this, stick around.

Do you remember when Elon Musk was trying to buy Twitter? This was April of 2022. Musk had made a huge offer for the social media giant, saying the company needed to be taken private and transformed. Only one problem. Twitter wasn't selling. This was a hostile takeover. Both sides went back and forth for a while. The company eventually put up a defense mechanism that would have made it more expensive. But Elon Musk being Elon Musk, money was not much of an issue, and eventually he prevailed and bought the company for $44 billion, well over what it was actually worth. You know what happened next. Musk renamed the platform, it's called X Now. He loosened restrictions on content moderation. He integrated his AI chatbot Grok, and the result, according to critics, is a site that is filled with way more explicit content, way more hate and vitriol, whether you want to see it or not. Point of that story is this. So what happens when this playbook gets used by the companies in charge of our entertainment?

And there's some breaking news coming in. Paramount has just announced it is launching a hostile takeover bid for CNN's parent company, Warner Brothers Discovery. This is just after WBD announced a deal with Netflix.

Netflix in Paramount's Pursuit of Warner Brothers, one of Hollywood's most storied studios, is at its heart a drama involving a trio of billionaire CEOs with a guest appearance from President Donald Trump. Not exactly relatable. But whether you stream Game of Thrones or Bridgerton, get your news from CBS or CNN, or just care about big movies like Sinners.

Oh money come with blood, baby.

This will likely impact you if a deal gets approved. And that is a big if.

This would bring together two of the three biggest streamers out there, and it would involve Netflix taking over one of the most famed movie studios on the planet. So the regulatory questions are going to be huge here.

So let's try to answer some of these regulatory questions with someone who knows the rules well, because he used to enforce them.

My name is Alvaro Badoya and I am a former Commissioner at the Federal Trade Commission.

'So I want to start this conversation by reading what you wrote on X slash Twitter recently about this Netflix deal for Warner Brothers Discovery. You wrote, quote, the Netflix Warner deal is a horror movie and not like OG Scream or Sinners. This is like Human Centipede Part 23 on a long haul flight in the middle seat. Now I could barely watch the trailer for Human Centipede, so you're really painting quite the picture for me. Yeah, I didn't I I I used a lot of subtlety there, David. I don't know if you could tell. Yeah. So well, I want to dig into this because you spent nearly three years at the Federal Trade Commission, which is this agency devoted to looking at deals like this to make sure they don't run afoul of antitrust laws. So can we step back? How do regulators go about determining if a deal like this is going to be anti-competitive or monopolistic? Like what are they going to be looking at? I think there's a couple things right off the bat.

That you look at. One is who is in this market. So what the antitrust laws protect against are substantial reductions in competition in a given field in a given part of the country in a given market. And so what you look at here is Netflix is a streamer, right? And you want to look at the market of streamers. Now, some people say, and we can get to it. Some people say, oh, well, you got to include YouTube and TikTok in there. And I don't think so. But when I look at the market for streamers, I see that Netflix is far and away the number one streamer. I think they have over 300 million subscribers. HBO Max are the number four, and they are very clearly direct competitors. The other thing you look at is in a product market like this, you look at price. And when you look at price, what you want to see are not that many price increases, particularly above inflation. You wanna see companies really duking it out to compete for their watchers, their subscribers. And what you see in Netflix is a decade ago, the price without ads was $799, and now it's $17.99. And inflation would account for like two and a half bucks of that. And so this is not the behavior of a company that is tripping over itself to compete for its subscribers. And when you look at who its closest competitors are, like the HBO Max without ads costs somewhere right around $17.99. I think it's like a little more, a little less. And so what Netflix is proposing to do is take out its closest competitor, which is very obviously something that competition enforcers should be worried about. And why I think this deal is is so clearly illegal.

So the first of those deals, as announced last week, Netflix would buy Warner Brothers film and T V, basically all the Hollywood assets. None of the cable channels like CNN. Right. Yes. Well, so what about this Paramount hostile takeover bid that we've seen this week? This would be Paramount buying all of Warner Brothers Discovery, including the cable channels. And the backstory here is Skydance Media acquired Paramount earlier this year, the parent company of CBS. And Paramount CEO David Ellison is arguing that not only would this setup be better for Hollywood, it will have a better chance of being approved by regulators. Do you buy that?

I don't. That said, the sad fact is law enforcement when it comes to antitrust isn't really anymore about the law and facts. It's it's about who can hand the president a fatter envelope and a better quote unquote deal.

Should they be allowed to buy Warner Brothers? Should Netflix...

Well that's the question. They have a very big market share. And when they have Warner Brothers, you know, that share goes up a lot. So I don't know. That's gonna be for some economists to tell and also and I'll be involved in that decision too.

I think two nights ago the president stood at the Kennedy Center wearing a tuxedo saying, Yeah, I'll be involved. I'll be involved in that deal. Let's talk about the Paramount Hostel offer, right? So they're paying, I think, or offering to pay $20, $30 billion more than the Netflix offer. They they want to buy everything. Let's first talk about what's going to happen to news under that deal. You have a proposal to combine under the control of one family, the Ellison family, CBS News, HBO Max, which includes some of the sharpest news critiques of this president, i.e. John Oliver's last week tonight.

Right.

Will also include CNN. And this family, by the way, also has a key stake in TikTok through Oracle. I know a lot of people for whom the sum total of their media consumption is included in that bundle. I find it highly concerning that one family will control this aspect of it. But then look at who is going to jointly own these properties with the Allison family, right? So the Ellison's already own CBS, they already have this key stake in TikTok. Who is going to join them? The quote Kingdom of Saudi Arabia, and that is page 44 of the SEC filing. The Abu Dhabi and the Qataris are all jumping in on the game, as is Jared Kushner's fund. And so both from a control of the news standpoint and from a foreign powers controlling our news sources standpoint, I do not think this deal should be let through.

Well y yeah, and I wanted to say that these groups have said that they won't be involved in any governance of the new company. But so I I get the sense you're not buying that. But yet

I mean, I don't know. If someone owns billions of dollars in me, I don't need them to, you know, draft something on letterhead telling me what to do. If I have a sense of what they want me to do and I owe them billions of dollars, maybe I might listen to them. Maybe just maybe.

Well, on the President Trump part of all this, he did say that he would be involved. He admitted that the Netflix deal would be a lot of market share. But then the the very next day he's railing against CBS sixty minutes for its interview with Marjorie Taylor Green. He said the new owners aren't any better than the old ones, and the new owners, as we've discussed, are paramount. So what's he doing there? What's he doing there? That's what I'm asking you, is because it seems like even Ted Serandos from Netflix seems to have visited the White House to try to talk to Trump about some of all this and and you know, others have pointed out that Trump likes a winner and he seems to recognize that Netflix is number one in what it does. So I look I

Don't I don't know about Netflix being winners, but being quite responsible for the imminent demise of American movie theaters makes you not a winner. But what the president is saying right there is that's nice, that tastes okay, I want more. Already they've installed Bari Weiss as basically this cross network sensor.

And for those that don't know, this is someone who used to work at the New York Times, then she started her own outlet, the free press, and now she's been installed as this kind of top figure at CBS News.

Yes. And so what he's saying is, hey, you know, David, David Allison, you know, you made lots of nice promises before about what was going to happen to CBS, I want more. And sure enough, what did the Wall Street Journal report? That David Ellison had told the president that there would be big changes at CNN if this deal were to go through the Paramount deal, that is. And by the way, I I I interacted a little bit with Ted Sarandos when I was on Capitol Hill working for Senator Franken. And that guy's a deal maker. And so if on the one side you have David Allison saying, Sir, don't worry about CNN, we're gonna make big changes there. It's not clear to me that Mr. Sarandos isn't gonna open up this aspect of the deal with respect to CNN to make his deal sweeter.

We should say David Ellison has said he has committed to unbiased journalism and promised that CBS's editorial decision making would reflect the varied ideological perspectives of American viewers. And again, the current deal between Netflix and WBD does not involve CNN. We gotta take a quick break, but when I come back, Alvaro Badoya and I are gonna talk about how this could hit your wallet and the shows you watch. Stick around. So I do want to ask about the end consumer. You know, the vast majority of our listeners who are just at home wondering what to watch after a long day of work. Because I imagine some of them are asking, what's the problem with Netflix gobbling up an HBO or Paramount buying Warner Brothers Discovery? If I'm a consumer, I subscribe to most or all of these services, anyways. It's like the basic cable bundle these days. So wouldn't I want it to be a little more centralized so I can subscribe to just two or three services instead of six? Like what's the problem here? Two words. Jimmy Kimmel, another two words, free speech. But just on prices, like very practically, are people going to be paying more for these streaming services if they are consolidated?

Yeah, so let's look at the consumer side. Absolutely, they will be paying more. Okay. Just literally talk to anyone about their Netflix subscription. It has gone up and up and up and up. And so you've seen massive price increases. And what's going to happen if your closest competitor offering the product that is closest to yours at this most similar price point, i.e. H B L Max, goes off the air or gets married into you, you're going to have even more freedom to raise prices. But it's more than that. Okay. Because it's also about content. Warner Brothers Discovery is a studio that churns out tons of movies for movie theaters. And tons is the wrong word, right? Sometimes it's 12, sometimes it's 16 or 17. Yeah, at least compared to.

Yeah, at least compared to like the n the nineties when I was growing up, but yeah.

'Exactly. And so Warner Brothers Discovery is actually trying to put butts and seats in movie theaters. Okay. What Netflix does with the movies that it buys from writers, from directors, etc. Is even if you are a Scorsese, even if you are a Guillermo del Toro, you know, they'll say, all right, you got, you know, three weeks in theater, and then we're gonna go straight to streaming. What does that do? What that does is kick out the legs from the few movie theaters that decide to take it on. And by the way, a lot of the large chains have said, no, we're not gonna do that. We're not gonna screen Romo, we're not gonna screen The Irishman, we're not gonna screen Frankenstein if you're just gonna give us three weeks, right? Because we have we have Warner Brothers who's giving us, you know, Superman and the Minecraft movie and Dune 2, you know, and they will actually give us these 90-day windows to really get people in our audiences. And so it's gonna affect movie theaters, it's gonna affect what's being put out there. And here's the other thing that writers will tell you, which is that they benefit from having lots of places to take their new and interesting shows. You're a writer, you have a really cool script idea. Are you gonna sell it to HBO Max right now? You won't, because you have no idea what's gonna happen to it. You're only gonna go to these other places. So already there's someone off the table. And so you aren't just gonna see price increases. You're going to see movie theaters close down and you're going to see fewer interesting offerings out there in terms of what you're watching.

Yeah, and we should say we haven't heard anything to suggest HBO or Warner Brothers would specifically change their content strategy in the wake of a Netflix deal. And on the movie front, Netflix has insisted that they would maintain Warner Brothers theatrical model. They say they have no opposition to movie theaters, but in the past, they have been resistant to putting their movies in movie theaters because their whole business is showing it to people on the couch so they can stay engaged with the service as long as possible. I personally love movies. I love going to the movie theater. I don't want that to go away, but I do realize that less and less people are going. And from the studio perspective, the business model is just kind of outdated, right? It takes millions of dollars and a lot of years to make a movie, and then you have to spend millions of dollars more to market it so people can come to the theater. And from their point of view, it just makes more sense to put it straight on the service. I get that. So is this just a moment where traditional Hollywood players like Warner Brothers are saying, the future is now, we got to evolve.

Mr. Sarandos doesn't want to serve consumers. Mr. Sarandos wants to make a dollar. And he doesn't want to make a dollar. He wants to make billions of dollars. So I am old enough to remember, and I'm pretty sure you are too, David, when all of the Barnes and Nobles started failing because of Amazon. And then all the local bookstores started failing because of Amazon. And Amazon would always say, Oh no, people want this stuff right at home. I don't want to go to bookstore. Well, I don't want to go book bookstore. Why don't I go to bookstore? You just get it right at home. We'll send it to you at home. Right. And then I'm pretty sure you remember when years later, suddenly what did we start seeing? Amazon bookstores.

Yeah.

Right. No one no one likes bookstores until we own the bookstores. It didn't work out either because those bookstores were bananas. What I'm saying is this number one, Netflix isn't isn't gonna care about movie theaters until Netflix owns movie theaters. And you heard it here first. One day Netflix is gonna own movie theaters. And so all this business about, oh, no one wants to watch the stuff at the theater, yeah, you think that because you don't own movie theaters.

Before I let you go, Alvaro, I have to ask, you spent nearly three years at the FTC before you were fired by President Trump in March, along with your fellow Democratic Commissioner Rebecca Slaughter. I know you believe that firing was illegal, according to your telling you resigned in June, but the Supreme Court actually heard oral arguments in Rebecca's case on Monday. And the justices seemed inclined to side with Trump in his quest to exert more control over federal agencies that were designed to be immune from political pressure. So I'm just wondering as we talk about a president potentially being involved in a major Hollywood merger in ways we really haven't seen before, do you see all of this as part of one story?

Absolutely. This is why we want independent agencies, right? You don't want a battle of the envelopes to decide which mega merger is going to get through. You want nonpartisan, independent experts looking at these proposed mergers and saying, how's this going to affect regular people watching at home? How's this going to affect the writers? How's this going to affect people who make movies? But the same goes for hospital mergers. The same goes for grocery mergers, right? What you want are nonpartisan independent experts running these agencies saying, what's this going to do to health insurance rates? What's this going to do to the kind of treatment people get? What's this going to do to the price of milk? Those are the kinds of questions you want people asking, not, you know, who's going to scratch my back the best. And that is precisely where we are headed in a world where the president can fire anyone for no reason. Again, if any of these people commits fraud, if any of these people neglect their duties, they could be fired like that under the law that Congress provided. But if that goes away, it's not going to matter if that toy has lead in it. It's not going to matter if that train track was negligently maintained. The only thing is going to matter is who has given how much to this president. And that's messed up.

Well, Alvaro, thanks so much for the perspective. I really appreciate it. And maybe I'll go check out Human Centipede. In Part twenty three, don't. It'll it's not a good experience. Thanks for being here.

Thank you.

That's all for us today, but this story is very fast moving, so make sure you head over to CNN.com or the CNN app for the very latest. We'll be back here on Sunday, so make sure you're following the show so the new episode will pop in right away. Thank you as always for listening. Talk to you later.