The USD 108 Billion Hollywood Standoff : Who Claims The Iron Throne of Warner Brothers Discovery?
๐๐๐Nothing captures the spirit of the Fire Horse than the absolute fireworks exploding in Hollywood right now. As a shareholder of $Warner Bros. Discovery(WBD)$
The Battle for the Crown Jewels: Why the War for WBD?
Why are Netflix and Paramount Skydance throwing billions at Warner Brothers Discovery? This is because WBD owns the "Thoroughbreds" of the entertainment world. We are not just talking about movies. We are talking about the cultural fabric of the century:
The Iron Throne: Game of Thrones, House of the Dragon and the entire HBO prestige library.
The Wizarding World: The global phenomenon of Harry Potter.
The Multiverse : Home to the DC Universe - Batman, Superman, Wonder Woman.
The Archives: A century of hits from Warner Bros. Studio and the massive unscripted empire of Discovery and CNN.
The Tale of Checking the "Saddles"
Before we bet on the winner, let's look at the financial health of the bidders:
Current Bid: Netflix at USD 27.75 per share (USD 83 Billion Total ). Paramount at USD 31.00 per share (USD 108 Billion Total)
Gearing Ratio : Netflix is 38% while Paramount is 52%.
The Strategy:
Netflix's strategy is Buy the Best , Spin the Rest. Netflix wants the Intellectual Property or IP that people will pay for until the next century. Netflix wants the " Best of the Best " to fuel their global machine. It wants:
The HBO Crown : Game of Thrones, Succession and the Last of Us.
The Movie Magic: The Warner Bros. Studio lot and its 100 year old history.
The Franchises : Harry Potter and the DC Universe.
The Result : Netflix integrates these into its existing app, instantly becoming the "Digital Utility" for all premium entertainment.
Spin the Rest: Netflix is a "pure play" tech company . It has zero interest in "old world" media assets that are shrinking. Netflix plan to spin off the segments that don't fit their high growth model.
Linear Cable Networks: CNN, Discovery Channel , Food Network and HGTV.
The Goal : Netflix keeps the "Fire" (the hits) and sheds the "Weight" (the declining cable business).
Paramount's Strategy: To keep WBD's empire together. Backed by the deep pockets of the Ellison family, it believes the "Fire Horse" energy of WBD only works when all its parts are galloping in the same direction.
Paramount wants to merge Paramount+ with Max (WBD) to create a singular, invincible streaming platform.
The Vision: Imagine one app where you can watch Top Gun and Yellowstone (Paramount) alongside House of Dragon and Harry Potter (WBD).
The Moat: Paramount believes that by keeping CNN, TNT Sports and the Discovery networks in-house , it owns the "Triple Threat" of TV: Live News, Live Sports and Premium Drama.
What It Means for WBD Shareholders
Paramount's USD 31/ share bid is an "all cash , all in" play . If it wins :
Shareholders of WBD will get a massive immediate payout.
They don't have to worry about a "spinoff" company.
However the regulatory hurdle is higher. Government often get "skittish" when 2 massive empires merge into one.
Why is the Market spooked for Netflix
The reason Netflix shares have dipped to a 16 month low is that investors are worried about the USD 82.7 billion price tag and the complexity of "spinning" those massive cable networks.
This maybe a "Dark Horse" moment for Netflix. The share price drop is not due to a collapse in Netflix's business. It is a cocktail of deal uncertainty, margin worries, technical selling and a market that is punishing anything with ambiguity.
Netflix is still the world's largest subscription streaming platform, serving members in more than 190 countries.
If you believe in Netflix's long term dominance and you are patient, this kind of selloff often becomes a buying window. However if you are short term focused, the volatility may not be over.
Concluding Thoughts
Whether Paramount's bid of USD 31 per share crosses the finish line or Netflix matches the fee to protect its bid, we are witnessing the birth of a new era. Either way I am still a winner as I am sitting at 213% gains due to the bidding war.
My Lunar New Year Wishes For The Tiger Community
May your Hong Baos be filled with the courage to buy when others are fearful. May your green candles light up the path to the moon. Huat Ah!๐๐๐๐งง๐งง๐งง๐๐๐๐ฐ๐ฐ๐ฐ
@Tiger_comments @TigerStars @Tiger_SG @TigerClub @CaptainTiger
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