A Very Merry Hostile Takeover Christmas!

If you haven't been living under a rock recently, you may have heard that Warner Bros. Discovery is up for grabs! Netflix was bragging about their "done deal" before Paramount Skydance swooped in with a better offer direct to shareholders and we're off to the races, people! It's going to be a very Hostile Takeover Christmas!

First, just to get it out of the way, neither situation is ideal. Then again, my ideal entertainment media landscape is many smaller indie production companies and that's not happening anytime soon. But if Warner Bros. must be bought, I have a few thoughts on who I would rather have win out in this battle of the billionaires.

The Situation: Since August, Paramount-Skydance CEO David Ellison has been trying to acquire Warner Bros. Discovery, the media and entertainment company behind Sinners, Superman, Weapons, and One Battle After Another, plus streaming services like HBO Max, and linear TV networks such as CNN, TNT, HGTV and Food Network. WB CEO David Zazlav hemmed and hawed with Ellison until December 5, when it was announced that Netflix would be acquiring all of WBD for a whopping $87.2 billion. Ellison, obviously upset by the upset, chose to bring his offer direct to WBD shareholders via a scathing open letter in which he explains exactly why his offer is superior and why Netflix stinks. According to the letter, WBD shareholders have 10 business days, or until December 24, to respond.

The Players:

Netflix co-founders Reed Hastings and Marc Randolph began their careers in tech. Hasting's degree is in mathematics and computer science and, before Netflix, he co-founded Pure Software, whose marketing director was none other than Marc Randolph. While Hastings has a mythic "I was fined $40 from Blockbuster so I decided to start Netflix" story, Randolph has claimed the inspiration was always Amazon's early bookselling model and Blockbuster has said no such transaction exists in their databases. Regardless of where they got the idea, in 1997 they disrupted the beloved '90s and early aughts video rental market with their mail-in monthly payment model, ushering in the era of subscription based media that makes us all roll our eyes and joke about returning to cable. During their heyday, roughly 2007-2012, Netflix would begin to move everything to an internet-based streaming service, complete with a fancy algorithm to recommend new shows and movies based on what you've already watched. Netflix began purchasing "Netflix Original" programming such as House of Cards and Orange is the New Black in 2011. Deals with other production companies and studios followed quickly, including commissioning ABC/Disney for major hits like Daredevil, Jessica Jones, Luke Cage, Iron Fist, and The Defenders.

Netflix, being founded by tech bros at the height of terrible tech bro culture (anyone remember the "dot-com bubble"?), adopts the "growth at all costs" mindset that has landed us in our current enshittification nightmare. After killing Blockbuster and other video rental companies, they began making more and more original content with an eventual goal of making half of their library Netflix Originals. With all of this hot new original programming, Netflix began eyeing the award show circuit, however their films were typically released either simultaneously in theaters and on streaming, undercutting the typical film distribution model in which films were released for a limited run in theaters, then made widely available via digital and physical copies approximately three months later. In 2018, Netflix pulled out of the Cannes Film Festival after new rules requiring competition films to be released in French theaters (and being booed when their logo preceded a showing of Okja in 2017). In 2019, the Netflix Original film Roma was the first to be nominated for an Academy Award under a new policy; that films must screen for a minimum of 7 days in Los Angeles to qualify. Steven Spielberg didn't think that was long enough, and complained that films "that are just given token qualifications in a couple of theaters for less than a week " shouldn't qualify. Unfortunately, Spielberg lost that battle and the rules remain unchanged, possibly indefinitely after the COVID-19 pandemic drove competing streaming services such as Disney+, HBO Max, and Peacock to adopt a similar simultaneous-release model.

While we all love watching movies at home (I know I do!), this model means that Netflix has almost complete vertical control over their Originals - from production to distribution to marketing. You can't buy (and therefore you cannot own) your favorite Netflix Originals, and if Netflix decides to pull it from their streaming services? Too bad, that media is gone forever. If you don't have Netflix you better get to the theaters the same week the movie is released or else you'll never see it again. And viewer data? While in previous years we could see the box office data with our own eyes, now we just kind of have to trust when Netflix tells us something is a hit. Oh, and your subscriptions are almost certainly going to rise (again).

So, Netflix killed the video rental industry and now it's going after the cinema industry.

But wait! It gets worse!

This whole deal is very obviously an anti-trust issue, and the government should block the purchase from taking place at all. Plenty of congresspeople have been vocal about this from both sides of the aisle. But what I'm more concerned about is the argument Netflix is making for why it should be allowed to buy WBD. Netflix says they need the massive WBD library and streaming platform HBO Max in order to compete with YouTube.

That's right, Netflix wants us to believe it's biggest competitor is YouTube.

The argument Netflix is making is that even if they do acquire HBO Max, their streaming watch time will only be 9% compared to YouTube's 13%. The problem with this argument is that YouTube is not an entertainment company. As our next player David Ellison put it, "saying that streaming is not a market is a little bit like looking at the beverage market and saying that Coke and Pepsi can merge because Budweiser is a replacement." Unless Netflix has plan to introduce user-generated content, YouTube and Netflix are not competitors. And that means that Netflix, which currently accounts for about 8% of total streaming views, is the undisputed streaming king.

Paramount-Skydance CEO David Ellison is the founder of Skydance Media, which has released some bangers in the film industry, including the Coen Brothers flick True Grit, Alex Garland's adaptation of Jeff Vandermeer's stunning novel Annihilation, and a movie that needs no introduction, Top Gun: Maverick. David's sister, Megan Ellison, is also in the film industry and founded Annapurna Pictures, which consistently releases award-winning films such as Her, Zero Dark Thirty, and If Beale Street Could Talk. David and Megan Ellison are the children of smarmy rich tech guy Larry Ellison, who is what they call a centibillionaire and was (briefly) the richest man in the world this past September. Larry is the CTO of Oracle, the company that recently acquired TikTok, thanks in large part to Larry's chumminess with Trump. Together, the Ellisons have been described by the BBC as the new Murdochs.

Ok, that sounds pretty bad. And it is. But! David Ellison also began his career as an actor, dropping out of film school to finance and act in the box office bomb Flyboys. And while his father is certainly part of Trump's inner circle, David donated almost a million dollars to Biden's re-election campaign last year (Larry notably did not donate to Trump's re-election campaign, despite historically being a big Republican donor and contributing more than $31 million to GOP candidates during the 2022 midterms). Unfortunately in nepotism-world we must always consider the sins of the father alongside those of the son, and Larry Ellison, who is funding much of the merger, has reportedly been in talks with Trump about axing certain CNN reporters, should the Paramount deal be approved. And I haven't even mentioned the three Middle Eastern wealth funds that are collectively contributing to the purchase for some reason.

Shit, I did it again. Yeah, that's pretty rough.

Here is where I would defend David again, saying we all deserve to slough off the shackles of our parents' legacies, yada yada yada, except almost as soon as David acquired Paramount, he chose to roll back their DEI policies in an effort to encourage Trump to approve the Paramount-Skydance merger, which faced similar anti-trust issues. David also disastrously issued an ultimatum to his work-from-home employees, telling them to get back into the office or take a buyout. Over 600 employees chose to take the buyout rather than return to work. This merger was also more than likely the reason Paramount agreed to settle with Trump in his $16 million lawsuit alleging a 60 Minutes interview with Presidential Candidate Kamala Harris was heavily edited and fire late night host Stephen Colbert. Trump has also claimed that Ellison offered him a "side-pot" of $20 million in free advertising should the Paramount-WBD merger go through.

(For what it's worth, Paramount has claimed no such side-pot offer was ever made.)

Who's Better?

So, who do I think should win in the WBD purchase war?

Frankly - no one. The Big Five Media Conglomerates - which includes Disney, Universal, Sony, Paramount, and Warner Bros. - shouldn't be allowed to merge any more than they already have, and Netflix shouldn't be able to buy them either.

I guess if I had to choose, Paramount-Skydance would at least maintain the status-quo in Hollywood, and give Paramount a catalog to rival that of Disney. Netflix has a history of disrupting (killing) industries, and while I do have plenty of problems with the current distribution model and Hollywood in general, I would hate to see the kind of changes I suspect Netflix would foist upon us.

Regardless of the outcome, it's sure to be an interesting battle and one that has deep impacts across the entertainment industry. In the same way that I plugged my nose and voted for Harris last year, I vaguely see Ellison as the lesser of two evils in a race to the bottom.

But really, I hope these two kill each other in the ring.