The less than straightforward question that everyone has, of course, is what happens next. But but I wanted to put it to you, like this. Does Netflix have the balance sheet, the the sort of financing flexibility, and the will, really, to amend, improve, boost its bid for Warner Brothers Discovery's studios and streaming business if needed?
Right. Let me tell you. We feel very good about the position we're in right now.
So we've done we've done we've this this process opened up. Warner Brothers Discovery has determined that within their strategic best interest to sell these assets, we entered into a negotiation. It was a very, very clear bidding process that they they laid out for us, which we followed and won that bid.
I think in the alternative, this guy has gone you know, missed every deadline. They've been taking nine runs of this bid, and they risk you know, they're not seem to they don't accept this outcome. So what we've done here, we've given, Warner Brothers Discovery a seven day window to get some clarity about what Paramount is offering to this company.
I believe that it's important to have that clarity. I think it's important that we want to build Discovery shareholders deserve to have that certainty and clarity about this deal. Now your stock is down more than 30% since you announced this deal.
So you feel good about it. Your shareholders, it's a little less clear. I know that I've heard you say that that is because of uncertainty, but it went down basically as soon as you went into this.
So I'm just wondering, is there a point at which it goes down so much that that you and and your fellow board members have to reconsider if this is the right path? Look. Guess, remember, we run this company from the beginning for the long term, but we think this deal will have a positive impact on the business for the long term.
Remember, what we're doing in buying these assets is we've been creating original programming on Netflix for about a decade. They've been making original film with series for about a hundred years. They have incredible IP, and we just happen to have a consumer model that can better maximize the returns on that IP.
So I think it's a very it's a great long term out you know, long term outcome. I think there has been some headwind in the stock. There's been some headwind in headwind in the sector, and there's been some headwind for because of the AI trade, which I think is ironic because I think AI will be an amazing creator tool to actually make the entertainment business bigger and better than ever.
So I I do think those things have gotta play out. When I said they don't like uncertainty, there's, you know, there's concern about bidding wars and all those things. And we have always been an incredibly disciplined last buyer, and we will continue to be one here.
Ted, on those headwinds you mentioned, you know, there are a portion of the of the Netflix investor base and and the Warner Brothers Discovery investor base that kind of see this as defensive by you and look at growth, right, you know, engagement growth in the second half of last year such as it was. What what would you say to those people that this is response to to that growth rate that you've experienced more recently as opposed to something proactive and strategic? I think that they're incorrect.
They're reading it wrong. I'd say that we if you look at our the year we just came out of in 2025, we grew revenue 16%. We grew operating income by 30%.
And our engagement did go up. It went up a couple of billion hours. And I feel like, you know, there's engagement, which is an important you know, view hours is one component of engagement.
It's certainly one component of the value of engagement. We're very confident. You saw that in our '26 guide that we're gonna continue to operate this business well and that this model is very much worse and that this Warner Brothers acquisition is an accelerant to that model.
And it also future proofs that model, you know, for for decades to come. Ted, I I appreciate there's a process here, and thank you, you know, kind of earlier for outlining it right through February 23. But before that, you know, the the section of the the investor base that basically thinks Netflix should walk away, look at the regulatory road ahead, they look at the integration risk, and then like what Netflix is, a big global technology company as opposed to being something sort of micro focused on The global entertainment Hollywood.
Right. And and so so so answer those those investors. Right?
You know, why why are they wrong that actually there is a longer list of reasons to walk away than stick with it at this juncture? Well, this this deal offers great value to the Warner Brothers Discovery shareholders. It offers great long term value to Netflix.
We have a we have a a normal regulatory path ahead. There's nothing uniquely challenged about that process. We are about in the middle of it with the DOJ, with the European regulators, with regulators all over the around the world and with state's attorney general.
This is a process that we're very confident that we're gonna navigate. And in fact, I'd say again, when you look at these deals that are out there, I think people would like the status quo. And we have have a long history of running the business well and visiting when it's time to and adding new business lines to the business that we both get upset about sometimes.
And then when we do it successfully, they're thrilled. I think advertising probably is the most recent example. Live could be a more recent example.
Some of our live sporting events could be a more recent example of things that have been pivots in the business that have gone on to grow the business very well, and people are very happy about it. People don't like change. They don't they don't like any degree of uncertainty sometimes.
And anytime there's a new deal, there is regulatory scrutiny. There is execution risk, all of those things. But we are highly confident Clear.
That we can we're gonna reach this deal close and and that we're gonna successfully integrate the business. I think about it as the the reason why we're all talking about these deals so much is this week. We've granted the seven day window to get some clarity about the Paramount deal because Paramount has been out spreading a lot of misinformation to shareholders and to the markets and to regulators in in ways that have run this narrative run the narrative This gives us a state of confusion.
We're trying to say, well, take seven days and get some clarity because what we believe is and and what the Warner Brothers Discovery board agrees with us on as well is that our deal is a superior deal. We believe it's good for them. We know it's good for us, and we are excited about getting it done.
When you talk about clarity and certainty, you know, one of the the aspects of of the Paramount deal that they have stressed is better, and I think some of the Warner Brothers shareholders seem to agree or at least entertain it is, you know, they're offering to buy the whole company. They will just take it out $30 a share. Warner Brothers doesn't have to proceed with a spin beforehand.
What is your argument for why your more complex deal is better for all those shareholders than just getting the cash tomorrow? Look. This deal is not complicated at all.
It is $27. 75 at plus the value of of Discovery Global. By the way, it's the deal that they want.
It is the deal that they asked for. The those these are the assets that were for sale. So, the the more complex thing is buying the whole company.
When you do that, then you're buying these European sports networks. As you know, sports rights in Europe are incredibly highly regulated as is the television landscape, which they'd be stepping themselves into. So I would argue that our deal is quite simple.
$27. 75 per share plus the value of Discovery Global, and which I think is an incredible asset. And and they do and they do too.
That's why that they set the the the offer up this way. That's why when we we were bidding, we bid for the assets that were for sale. If Discovery Global is is a a great asset, I'm I'm just wondering, have you guys talked about just buying the whole company and doing the spin yourself?
No. As you know, we we're the linear broadcast business is not something that we're interested in, but others are. And I think when I look at the business, particularly those European networks are are not in decline the way that some of, the way they are in The US.
So, it is not of our interest, but it's of sure I'm sure of interest of many buyers. Ted, you are competing in a in a politically sensitive media deal. There is reporting, and and and we are in a a time where the Ellisons are and their relationship to the Trump administration has been discussed.
It's also reported, of course, that that you met with the president, I think, on November 24. How are you weighing that and assessing that in in this scenario, that relationship between Paramount's leadership and and this administration? Look.
I I have spoke to the president about the state of the entertainment industry. We've had multiple conversations about how do we protect American jobs, how do we keep the entertainment industry healthy, what are those headwinds, what are what are those things that we're working on to try to keep production up in The United States? We are both investing a billion dollars into a new state of the art production facility at the old Fort Mombat military base in New Jersey.
Obviously, the president is very keenly interested in entertainment, and he's very interested in American industry and American jobs. So those are the conversations that we've had. I don't know I don't know why the Ellisons intimate that they have some direct line to the Department of Justice for clear for faster path of clearance, but I I doubt that they do.
This is a process that is being run by the Department of Justice. The president has been very clear on that. We've been very clear on that.
The Department of Justice published in 2023 the guidelines for mergers that they are following right now. So that's what's happening here. This is a business deal, not a not a political deal.
You're joining us on Bloomberg Television and Radio. We're speaking to Netflix's co CEO, Ted Sarandos. And and, Ted, last night, Bloomberg News reported that the justice department and its attorneys have made contact with with movie theaters, the industry, to try and understand, what either outcome would mean for for the movie theater business.
I know that that you actually have discussed this a little, theatrical releases, but just your your latest thinking on that and what your pitch is, to to to people on seats in movie theaters if you were to close your proposed deal? Yeah. Look.
It's an an very important thing to look at, and I think why the DOJ is having those conversations. Those are all laid out in the 2023 merger guidelines. To better understand the landscape, they're gonna talk to competitors and suppliers and to better understand the landscape, including how it impacts adjacent businesses like the theatrical business.
Now our pitch is very simple because it's the truth, which is we're gonna keep Warner Brothers running pretty much like they are today, releasing their movies in theaters for the traditional forty five day windows. And in fact, it's even quite better for theaters because now that we're gonna be in that business and own a theatrical distribution entity, we're gonna take some of the, Netflix films and put them through that as well. So it's very likely that you'll have, even more outcome of high quality films for the theaters if this deal goes through.
Now remember, Paramount has got this kind of fantasy proposal of somehow they're gonna go, from the half a dozen or so movies they distributed last year to 30 movies a year, which is about 10 movies more than the healthy studios are making now. I I don't think that's likely, but what I know is pass is is very likely is that we're gonna continue to operate that business largely as it is today, starting in the theaters, running through traditional windows, hitting HBO Max through those through the pay TV output deal, the a the output deals around the world. That's gonna continue, and it's gonna be good for the theaters because they're gonna have more.
And, by the way, I've been talking to them more about creative things that we do together, like we did the stranger things finale, which had thousands and thousands of sold out shows all over the country, or the the the k pop demon hunters sing along, which, you know, energized the theaters on an otherwise very slow week. So we're excited about working together with the theaters to make that business healthy again as well. And I think that what they really need is more good movies, and we're gonna provide them for them.
Now we both know that, you know, as many times as you've made this commitment on the theaters, it seems that there's a certain contingent of the population that just struggles to believe it. And I'm I'm wondering my sense is and I've heard that both theaters and some of the the trade unions in Hollywood have asked for sort of formal commitments on some things like level of production, theatrical releases. Are you willing to to kind of put those commitments in writing?
And if not, why not? Lucas, let's be clear. There we don't this is this deal does not represent any concentration risk at all.
So the those two would typically be remedies, for a situation like that. According to Nielsen, we have 9% of the business. We're gonna add HBO to that.
We're gonna have 10% of the TV business, which is the primary driver of this deal out of our business. In the theatrical business, it's highly competitive. There's a lot of put output that's gonna go through there.
The reason I'm not gonna put it in right, I wouldn't want to do this deal only to put ourselves at some bizarre competitive disadvantage down the road. And and I've earned some of the skepticism about the theater business because I've said things about the state of the theater business, but I said that in the context of a business that we were not in. And we and today, we're we we we own Warner Brothers.
We own a theatrical distribution entity, we're and gonna want to continue to invest against the success that they've had. They just Pam and Mike just opened their ninth number one film at the box office, nine in a row. That's the kind of winning that we wanna do with with Warner Brothers and the theater owners.
You mentioned, HBO, and and one of the you just guy sorry. If I go back to what you said about the trade unions as well, I think it's very important that I I would like to have the trade unions to support this deal on behalf of their membership because what's gonna happen in the alternative of this deal, I know there's some people who believe, you know, maybe if this deal go doesn't happen, there'll be no sale of Warner Brothers. This sale is going to happen.
It's gonna be Netflix or it's gonna be Paramount. And if it's Paramount, they've told everybody what they're gonna do. They're going to have 6 they've said $6,000,000,000 in cuts, but they've also told everyone who they're borrowing the money from that they're gonna delever the company from six or seven times down to two times in eighteen months, which means $16,000,000,000 in cuts.
So that's what the trade unions who represent the people who make movies, writers, directors, producers, the the the crews of, you know, and and the teamsters. They're gonna be working in a business that's gonna be $16,000,000,000 smaller even than the 3,000,000,000 that Paramount has already cut out of its own company. So you're talking about an an enormous contraction of the business, and the trade unions, I think, should come out come out and support this deal explicitly on behalf of their membership to protect employment and jobs.
Now I'm I'm curious. You brought up HBO, and and one of the big kind of regulatory questions around this, you know, antitrust law depends on will prices go up for consumers? Is this bad for consumers?
Are you going to offer HBO on a standalone basis going forward, and will you offer it for less than it is offered today? We we will continue to offer it as a standalone unit. 80% of HBO Max subscribers in The United States have a Netflix subscription today, actually closer to 85%.
So I think what that says is this is a very complementary business, and we'll be able to put those businesses together and give those consumers a pretty steep discount. So that we're excited to do, and that's why I think this will be pro consumer, because I think consumers have already said these are complementary businesses that they today pay a 100% premium for.
