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Warner Brothers Discovery has agreed to reopen negotiations with Paramount Skydance after Paramount proposts raising its bid and sweetened other terms of its offer, setting the stage for a renewed showdown with Netflix. This according to a statement on Tuesday. This wasn't news to any of you, though, because you all saw Lucas Shaw and Michelle F. Davis's scoop on Sunday when they exclusively reported that Warner Brothers was weighing.
Reopening networking over the weekend with Paramount.
Lucashaw's Managing editor for Media Entertainment for Bloomberg News. Michelle Davis is the Bloomberg News Senior m and a reporter. Lucas is in La Michelle is here in our Bloomberg Interactive at Broker's studio, Michelle, I want to start with you the deal, the Netflix versus the Paramount deal. These are not apples and orange or apples to apples. It's apples and oranges. What is different though about Paramount skuy Dances deal this time versus you know, a few weeks ago.
Yeah, I mean, and this is the moment we've kind of all been waiting for, because, of course, Paramount has been saying for months, you know, thirty wasn't our best and final offer. And what's really different. The big news that came out this morning was that it came out that Paramount's banker basically called Warner Brothers and said, hey, if you guys engage with us, we will offer at
least thirty one dollars per share. This was after last week Paramount had made some concessions that the Warner Brothers board had been asking for, and so now during the next seven days it's basically the time for Paramount to show whatever it's best and final is. Warner Brothers has said, you know, put your best foot forward. This is going to you know, put up or shut up basically, and so we'll see if you know what Paramount comes up with.
So now the ball is in the court of Netflix.
The ball is in Paramount's court right now. So right now, Warner Brothers will be talking to Paramount to clarify the terms of its latest offer. Basically, they want whatever Paaramount has said in writing. If the board determines that this is a superior offer, then Netflix will have a chance to match it. And remember, as the incumbent, Netflix only has to match or tie whatever Paaramount has put on the table because they're not apples to apples. That means
it doesn't technically have to be the same number. The board will have to weigh, you know, if they are on equal footing, and that would put Netflix in the lead again.
Hey, Lucas Shaw, come on in here. You're joining us from LA. You've been following this deal, you know since before the beginning. Is this a start of any bidding war?
That's what Warner Brothers Discovery shareholders are hoping for, right I think Michelle talked about this a little bit. There's been a desire that in the thought that Paramount would go higher. That they are backed by the Ellisant family, they have hundreds of billions of dollars and they can spend even more, and it feels inevitable that Paramount will offer more money, and then it will be up to
Netflix whether it wants to meet that or not. So I think the price is certainly going up, but I don't know if it's going to be a frenzy bidding war, right. Netflix shareholders certainly don't want to see a crazy bidding war, And even though Paramount shareholders don't ultimately have a say, except for the Ellisons, I don't think they want to see the company get even more levered and indebted than it already is and will be if it does this deal.
Who's Hollywood rooting for Lucas.
Hollywood's pretty split, you know. I think initially the shock of the Netflix deal made people against it. You know, Netflix has had a big impact on how this business works, some for good, some for bad. The more time goes by, I think people are divided. Right, Folks who really care about movie theaters still tend to be against the Netflix deal. They don't really believe Netflix when they say they're going
to put movies in leaders. People who are perhaps liberal leaning politically, which is a lot of Hollywood, are very worried about the Ellison's impact on CPS news and then in terms of jobs, it's sort of hard to say, right, Paramount is would be way more likely to fire people right away. They've pouted billions of dollars in synergies, but you know, Netflix could have a more negative impact on the larger ecosystem. Netflix is certainly arguing that they're better
for Hollywood, Paramount saying the same. Yeah, and I think people don't really know how to feel well on that.
Netflix did issue a statement and they said, while we are confident that our transaction provides superior value and certainty, we recognize the ongoing distraction for Warner Brothers Discovery stockholders and the broader entertainment industry caused by Paramount Sky Scott Ants's antics. And this was a statement that they put out.
They go on to say, this does not change the fact that we have the only signed, board recommended agreement with Warner Brothers Discovery, and ours is the only certain path to delivering value to Warner brother Discovery stockholders.
Okay, they're right, right, Well, will Michelle come on in on that? I mean, is you know thirty one dollars a share? Would is this best and final coming from Paramount's guidance.
I think that's the big question. The Paramount banker that had reached out to Warner Brothers said we would offer or Paramount would offer at least thirty one dollars per share. But there's also some documentation issues that still need to be worked through. Warner Brothers wants to be allowed to operate kind of freely in the interim period before this deal closes, and Paramount has held back on some things
that Warner Brothers has wanted. In an ideal scenario, Paramount would just basically take the Netflix agreement, erase Netflix's name and put its own name there and you know, higher share price, and that would be enough to get the deal done. It might not be as easy.
They want, but they want the Linear Networks too.
They do.
But there are you know, certain terms that are may maybe friendly or to Warner Brothers that Paramount has been dragging its heels on Lucas.
Is this about what David Zaslov wants ultimately for his company or is it just about getting the best financial deal, which, to be fair, yes, but also as someone selling their company, they do want to get the best deal for their shareholders.
I would assume.
Look, David As obviously has a lot of influence on the process. Who's the CEO of the company. He's on the board, a lot of people on the board know and like him, But I don't think he gets to make the final decision here.
Right.
You have a number of very experienced board members who've been through a lot of deals. They added a few people to their board over the last year two essentially an anticipation of this moment. I think they're looking at what's best for the company and what's best for shareholders. It's pretty clear that the board has had a preference for the kind of Netflix's offer, and also how Netflix has gone about the process. I don't think that should
be a huge surprise. Netflix has a much larger and more valuable company and has been run better over the last decade than Paramount has. So if you're saying, who do I trust to kind of handle these assets, that would be Netflix. And so there's an aspect of what they're doing here where they're basically saying Paramount blow us away because we know, if you only go up a dollar or two, Netflix is probably gonna yeah. But if you go up five dollars, got it? Which probably can and we got.
To take it all right, Lucas Shaw, so appreciate it. Michelle Davis as well. The latest check it out on the Bloomberg.
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When we look at the markets, we are also keeping a watch on Apple because we are seeing that stock move in today's session. The shares prices up about four percent here, so quite a spike here. Happening on a Bloomberg exclusive this the company is accelerating development of three new wearable devices as part of a shift toward artificial intelligence powered hardware. It's a category tim also being pursued by Open AI meta platforms. I mean, everybody's kind of moving into space.
I want to bring in a marker. I mean he's in our LA bureau. He's Bloomberg News Managing editor for Global Consumer Tech. Congratulations on yet another scoop glasses, a pendant and camera AirPods.
What did you learn?
Yeah, so Apple's been working on these devices for quite a while, and the strategy is to hit consumers wherever they want their AI, whether it's on their face, whether it's on their body, whether it's around their neck, whether it's in their ears, creating different devices for different features, with different types of cameras. You can see there's different tears here. Obviously, the pendant is something entry level, it's
an accessory eyes and ears to the phone. The air pods is something more substantial, right with that audio gear in there. And then there's the high end of the AI strategy being the smart glasses with the high resolution camera, a computer vision camera, all sorts of functionality to really augment without a display, your real world experience using AI.
Hey, so all built around the serie digital assistant. We all know our love and dislike of all I know, I know and being a little obnoxious. Are frustrated, which it was Siri. Don't they have to get Siri right first?
Mark, That's exactly right.
All of these products hinge on them being able to bring the new sery to market in it actually being to your point effective. They were supposed to launch it actually this month by way of introducing it, and they were supposed to release it to consumers sometime next month as part of iOS twenty six point four. But I reported last week they had hit a bunch of snags and issues and that Seri will not be arriving this spring. The Personalized Theoria will be arriving later this year, in
addition to some of the other Serie features. And so none of this launches until those launch, and so we'll see what happens, but it all hinges on that.
So I want to drill into some of these devices that you've been reporting on that you have reported on in this piece dependent the eyes and ears connected to the iPhone, what exactly does an Apple pendant do? And look, we should note it's no guarantee that all of these are going to come to market, right.
Yeah, I do think these are ultimately all going to launch, But like I was saying, they have worked on other wearables with cameras that they canceled last May. They canceled an Apple Watch and Apple Watch Ultra with a camera. So we'll see what happens, but this is something that they're seriously working on. Tim Cook held an all hands meeting with employees earlier this month, where he said the
company is investing heavily and new stuff. He did acknowledge that AI devices are the future, and he said the world is moving fast, and so he hinted that these were coming.
Hey, Mark, I want to look at ADRs of esalar Lexotica. This is the parent company of many glasses brands out there. They work very closely with Meta platforms. You've been outspoken about how well the meta platforms glasses work. If Apple is indeed competing with es Lexotica, and after your piece came out, we saw shares take a dive on the
day today. If indeed Apple is working on a competitor to Meta's glasses, what can you tell us about what would differentiate them, what would be the Apple experience, how they'd be different than what's out there on the market.
Yeah, I mean the main two things are camera technology and build quality. That's according to people working on the glasses. They believe that the build quality using things like acrylic and other higher end non plastic materials are going to make their glasses a bit higher end and more premium than what Meta is offering. Obviously, Meta works with slew
different brands. They've got Oakley, They've got ray Ban and obviously Prada is the biggest fashion oriented brand under the Extra Exotica umbrella, and so you'll see Prata versions of the metaglasses probably sometime this year, but definitely that's what they're trying to differentiate on. The other is camera technology. The metaglasses, they have one camera that can move between
computer vision and for photo and video. Apple has a dedicated photo video camera and a dedicated computer vision camera, and their belief is by having both cameras they can get a better quality on each of those factors.
Hey, Mark, what about the time you hear I mean, this is a pretty deep dive, and I know you've got your sources and all that good stuff and good reads on the company, but it sounds like there has been a lot going on behind the scenes when it comes to how they're thinking about the AI world and what it means for hardware, and it sounds like some of that is starting to maybe early but payoff in terms of they've got specifics here.
Well, nothing's going to start paying off until Siri is ready. Like I said, the releases of this hardware will all hinge on them having a working voice assistant. And the hope is with this Gemini partnership, they will have one,
and I'm pretty confident they will have one. I think the way that they're going to revamp iOS in the fall with their new Campo Voice Assistant, that's the code name for this new version of Siri, in integrating the Gemini models throughout the system, I think it's going to be fairly effective. So they need to get that done. In terms of the timing, for a while now, they have been earmarking and introduction of the small glasses at the tail end of this year, with production beginning at
the very end of this year. I'm told production is still planned for December. That's beginning of production, with the release sometime in twenty twenty, so next year. The AirPods could be released as early as this year, but of course that hinges as well on the Gemini partnership in Serie working out, and the Pendant is likely an end of twenty seven thing at the earliest.
Hey Mark, just last question analysts, investors, they want to know the next killer product from Apple, and I think some people thought it would be a car years ago. That's obviously not happening. Some people thought it could be Vision Pro that's obviously not happening at the end of the day. Is your piece notes. All of this still
sort of hinges around the Apple iPhone ecosystem iOS. These are still all tertiary products, right, These are no sort of like freestanding single product that is like the next killer piece of hardware.
Right.
Well, I think it's the family of AI wearables that is the sort of next big thing. It's not one single item, but it is things. It is a group of things. And so you'll see AI wearables be one new category, and then you'll see home devices be another big category from Apple. So those are the next two big categories, with the through line being AI and them being able to launch neither until the AI works all.
Right, Great stuff, as always, another exclusive from our Markerman Mark. Thank you so much for jumping on with us and laying this out. Mark German, Managing editor for Global Consumer Tech at Bloomberg News. Joining us from the Bloomberg News bureau in Los Angeles.
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To say in Jeffrey Epstein's World few billionaires, though loom as large as Leon Blacks, certainly very well known to the Bloomberg audience. The Justice Department's largest release yet of the Epstein file shows he was Leon Black's stealthy, do it all fixer. And I mean it's interesting is our team is going through documents, you realize how close Epstein was with a lot of very influential people.
Hey, part of that team includes Max Abilson. He's Bloomberg News financi reporter. He joins us here in the Bloomberg Interactive Broker's studio. We're going to get to what you found in your story, what you found going through this latest batch of files, which at this point was two weeks ago, but still the stories are still coming out. I mean, how do you do this something like this? How do you take on a trove like this and
then find the stories and tease them ount? I mean, this is kind of unlike anything that journalists have had to do.
That's such a that's such a generous question. Thank you for asking that. Well, I'll tell you, I'll give you the real answer. The real answer, first of all, is teamwork. I think of this Epstein work, at least for me personally, is kind of bifurcated into two different eras. Last year I worked with an incredible team, people like Harry Wilson and archarlie'deva and Jason and Lauren Eder, and it goes on and on, and we had access to I mean, it was so many emails to us. It was like
eighteen thousands, more than nineteen thousand emails. And we spent months together digging, and you know, thinking like, okay, geez, you understand the law, so you dig into lawyers. You know, you understand the investments. You look into that, or money laundering you look into that. We split it up, we worked together. It was it was a very honestly, it was quite a moving experience. It was also extremely grim, as you might imagine. But eighteen thousand, I mean that's
a pimple. That's nothing compared to what's been happening in these last few weeks, three and a half million files. I mean, I want to be my professional self and make sense of it for you too, and for viewers and listeners. But just to be honest, it is hard
to make sense of it. The scale alone, just how much material there is here to be to sort of meet these documents where they are and to not either be dismissive of them and be like, you know, well, what does it matter it's so much, or rather I should say, to not be overwhelmed by them, and then to not sort of wave our arms and get overly excited about things that aren't really there. So we're splitting
it up. I worked with Laura Benitez for the story about Leon Black at David Sheer, our editor, and what we did is we clicked one after another and we're trying to read them all, trying to put them into chronological order, trying to understand them, trying to understand what they mean, and trying to understand these relationships.
Because not everything's in order right, and there's redacted stuff and you've got to kind of sometimes piece things together correct.
I would be so happy or in order, and you know what, I feel very proud of working in the news room with journalists who I admire and we're fond of. But I want to give a shout out not just to our colleagues across Wall street journalism who've been looking into Epstein and Leon Black now for years or at least for months, if not years and years.
In some cases.
But in this case, you know, even just readers who are interested, people on Twitter, people who are digging in. It seems it's like reminds me of like being in school. It's like a large group project. Everyone's kind of throwing in. People are looking and it's fun to be digging alongside what feels like kind of a collective effort.
Well, let's dig.
Let's talk about that digging. So I just want to throw out some numbers here. Leon Black has acknowledged paying Jeffrey Epstein one hundred and fifty eight million dollars over the year, saying it was for advice on a state and tax planning. The new relylease documents, though that you and the team found said it was for much more than just a state and tax planning. What else did he do?
Well, Just to be really, really, really specific, the way I'm going to put it is going to be slightly different from that, which is the way that I'm going to say it is. Leon Black's story up until now has been like something along the lines of I don't want to overgeneralize for him, but it's been something along the lines of like, look, he gave me tax advice, and his sax advice was good and it was worth it.
And there's some there's some other things on the side, things like estate planning and what our story is about.
And I hope.
Viewers and listeners will go go check out our story called the Leon Black Files. What it's about is some really concrete things. One is one is an angry mistress. One is an angry mistress of of Leon Blacks, or to be fair, I think at the time of these emails, she was a former mistress. And and Epstein, who by then was a sex offender, he helped Black kind of kind of manage the situation. We can talk about in what ways and then let's let's think about sort of
off to the side. There are these I r S questions about gifts to another woman, this is this is going to be a second woman, and the way the way that Epstein was a fixer for this man and watching him work. Of course, you know, the best we can do is watching his and send and receive emails. But it was it was quite an experience for you know,
I've been. I've been at this now, writing about Wall Street, ratting about money in our here at Bloomberg News for fifteen years, maybe more now, But I can't remember the last time I had the feeling of sort of watching
watching history unfold before me, or watching a movie. I mean, it's I don't want to make it sound fun or romanticize it, because it's as grim and difficult work, but it really was amazing to see sort of email by email, month by month, year by year, to see how Epstein just goes to work trying to fix the dark secrets of a very important billionaire.
You know, it always blows me away from just the various things I've been reading here at Bloomberg and elsewhere when it comes to Jeffrey Epstein is just the level of intimacy that he has with certainly people that we cover so much at Bloomberg, with these titans of finance.
I mean, Apollo is kind of an iconic firm in many ways and very revered and still is on Wall Street, and Leon Black created this firm, and so whether it's Epstein helping with family portras like that stuck out like that's a level like I understand maybe the estate planning, because that's kind of what Epstein was doing. But the involvement in even very personal things is kind of interesting.
That level I have relationship. I think that might be one of the most profound things going on. You simply cannot exaggerate it. The level of involvement and the level of intimacy, personal and professional intimacy that Epstein craved and won from these powerful people. Know, I know for obvious reasons that a lot of people who are interested in Epstein and interested in the Epstein files are john to political leaders Bill Clinton, Donald Trump.
That makes sense.
These people were presidents and leaders of the free world, as it were. But I want to say a word for just focusing on the financial the financial moguls that are involved.
And kind of have everything right, and they're wealthy, and they seemed like it's just I'm not.
I don't know, that's right, I know.
I mean, do you remember, do you remember when I worked with Jason on an oral history of Juxel Burnham Lambert. You and I talked way many years ago, and you know that that, of course is Michael Milkin and a junk bond empire, and you know who was there back back.
Then sir Leon Black, right, and you know, to.
Track his career that was of course, that was a long time ago in nineteen eighties. But to at track Leon Black's career and what he did with Apollo, I think it's I think it's really fair to say that he and his peers are a part of the generation that reshaped the landscape of American finance the private equity. Private equity was invented before then. Mainly I'm Black didn't personally invent private equity. That wouldn't be fair, but ran
with it. But what Apollo and what Leon Black did as shaping shaping American finance was important and is important, and I hope that readers will find it important to understand in detail and with fairness and with care and with facts, just exactly what I've seen was doing. And you know, some of it was as you say, like arranging you know, family portraits or you know, meeting is his young adult kids. But but but some of it,
some of it was grim, some of it. You know, you you described that Lean Black sort of would have it all, but clearly he also had he also had problems and issues, and and Epstein was clearly want to work trying to help some of them.
The art side of this, What was the role of art in your story?
Well, you know, I'll answer your your question, which has to do with not only Paul Clay but also an art book publishing company called Faidan.
But also it's a very famous company that makes like very expensive beautiful books.
That's right, nice coffee table books.
I think I have some Fadan books in our library at home, so I want to try to spell that out. But I also just want to give a quick shout out to some of the reporting that we've been doing elsewhere. There's a great story on Cambodian art, so went interested in the Epstein Files and art told check out the Bloomberg News piece on Cambodian art. There's also there's also more more in this general subject of art in the
Epstein Files. But in this case, but in this case, it's fair to say that one of Black's investment vehicles agreed to pay I want to say, a one point eight million dollar commission for helping to sell a Paul Clay oil work, and that was like, you know, about twenty three percent of the sale price, and that money went to one of the women that I was describing before. So you know, we want to be really careful when we do this reporting. We don't want to put one
in one together and get three right. We don't want to overdescribe, and we don't want to underdescribe. We don't want to undersell it. But absolutely it's fair to say that Black paid a lot of money to one of the women who I guess were one of the two women that I described earlier.
Yeah.
Yeah, I think, like all of this reporting that that you are doing and the team are doing, it's just the tentacles of these stories and they're not just very simple line like, there's just so much to it, you know what I mean, like each each aspect of it. And he's right, we want to be very careful. But I think what increasingly we're getting this fuller picture and impact, if you will, of what we simply put as Jeffrey Epstein, No, I hear you so much more.
I mean, speaking reporter to reporter.
I think that sometimes when I'm feeling overwhelmed at work and story subjects seem too hard or too convoluted, or too obscure to opaque, I find that it's sort of it helps to remember that It's like, you know, honestly, they're cliches, but I'm gonna use them anyway. It's like follow the money.
Yeah, you know, what are we doing here?
We're follow the money. You know, we're chronicling capitalism. You know, capitalism is interesting and it's important, and I think one way to describe.
That files is that they allow us to chronicle capitalism.
Incredible zoeys Max Abelson, Thank you so much.
You're listening to the Bloomberg Business Weekdaily podcast. Catch us live weekday afternoons from two to five pm Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app, or watch us live on YouTube.
I want to bring in Bill Smith, founder, chairman and CIO of Smeed Capital Management. The firm has about five point six billion dollars in assets under management. He joins us from Phoenix, Arizona.
Bill, Wait, are you in your own radio studio?
They do podcasts there.
That's pretty impressive.
It's the podcast room.
Hey, Bill, the AI enthusiasm of today. You've talked about this with us in the past, but not not recently, not in a few months, and it's kind of gotten even more enthusiastic. Since then you argue this resembles past manias, like the late nineteen nineties. I'm going to utter those words in a question to you, isn't this time different?
Well, it's always different. That's the problem with manias is they're all different, but they rhyme. So what put me over the edge on this one was when they named the nine people that created AI, two ladies and seven men, and they put them on the steel beam, imitating the Time magazine cover from nineteen thirty two where the construction workers are sitting on the steel beam eating lunch with way off the ground in Manhattan, and they put the
nine of them superimposed on there. And so I said to my analyst team, I said, gee, let's look back over the last twenty five years and ask the question, how many times as a stock market or business person been the Time Person of the Year, And in the twenty five times, it's only happened four times in the last twenty five years, and one of those was a
negative reason. The accountants that disclosed the en run and WORLDCLM debacle were named the Time Person of the Year at the end of twenty one, but one of the other three was Jeff Bezos was named the Time Person of the Year December twenty seventh, nineteen ninety nine, and then the AI people, well, Jeff bezos stock fell ninety five percent over the next eighteen months from that magazine cover. Okay, but even though it ended up being an incredibly successful company,
I mean, people got destroyed. I mean, no one makes it. No one makes it back from a ninety five percent loss unless they're part of the company like Jeff was. So so it was kind of like the ultimate timing indicator that time. The front cover of a magazine in the investment business is a curse.
And to be fair, you did mention, you know, the success of Amazon. It's over two trillion dollar company. Now Jeff Bezos is the fifth wealthiest person in the world, with a fortune of over two hundred and twenty five billion dollars. Are you saying that? Are you saying that, or are you saying that at this point we are going to see some sort of correction like we saw a post nineteen ninety nine.
Yes.
In other words, regardless of how much you think of any of the companies involved, first of all, the next two to three years are not likely to be good for their stocks because we had reached a pinnacle. That also can be measured in other markers. The other two markers we've used is Buffett wrote in eight at the bottom by American, I am because the stock market was eighty percent of the GDP, and the stock market is
two hundred and twenty percent of the GDP. And if you if you can listen real closely, you can hear Buffett whispering, hold a lot of cash. I am okay. So that's the second marker is that that's at a reverse right now. The GDP to stock market marker is
way off. And then lastly, we took a look at all the forty year lookbacks since nineteen thirty nine, and this at the end of December was the best forty year return in the S ANDP on appreciation nine percent compounded appreciation going back forty years, and the second, third and fourth place finishers ten years later. The S and P was lower all three times. In other words, you lost money in capital appreciation over the course of the next ten years all three times the market was this good.
So a couple of things I just want to listen to you, Bill, like in terms of Amazon, like everybody always says, invest for the long term. So have you invested for the long term in Amazon even through those years as it was investing in holding out you know, longer term, it seems like it's turned out to be a pretty good investment. When do you know, like AI,
Nobody says we really know. We just talked about Mary Daily of the San Francisco Fed trying to talk about AI and the economy, and like everybody who comes on says, we just don't really know the impact and who ultimately will be winners and losers. So do you just not make the bets now? Or can you assume that the bigger players are going to be the ones that are
the most successful because they have the deepest pockets. Even though you look at a company like Amazon, which is about to go what negative in terms of free cash flow for the first time or not for the first time, but it's something that we haven't seen with a name like Amazon in a long time.
Well, we just looked at a chart today. Over the last five years, Amazon has underperformed the S and P five hundred for just as one example. You picked on one example, So think of it like this.
Just got above their seconds.
Yeah, go ahead, the two.
Sides of investing ignorance avoidance, okay, and then stock selection ignorance avoidance means that for you to squeeze blood out of a turn up that has been as strong as tech has been in the last ten years, you're asking for all recorded history to be reversed, stock market history, all of it needs to be reversed. It means tulip bulbs are going to keep coming up. It means the dot com bubble is going to go on forever. That's the problem. The problem isn't that there's not meritorious companies.
There are meritorious companies and it is going to change our life. The problem is the investment rewards have already been taken for probably the next five years.
All Right, interesting stuff, Bill, so appreciate it. Bill Smeeth, Chief investment Officer at SMED Capital Management, joining us.
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