The deal closes today

Skydance's acquisition of Warner Bros. Discovery officially closed the day this interview was recorded. The combined company will be called Skydance, not Warner or Paramount.

Who owns Skydance

Skydance is owned by David Ellison, who is forty-three years old. His father is Larry Ellison, the eighth richest man in the world and CEO of Oracle.

A history of failure

Every previous owner of Warner Bros. has failed. AOL failed. AT&T failed. Discovery failed, though it did succeed in flipping the assets to Skydance.

The debt burden

This deal is levered to the max with eighty billion dollars in debt. The previous owner, David Zaslav, could not manage the debt he took on to buy the company.

The cost-cutting plan

Skydance promises to save six billion dollars over the next three years by merging the two companies. Most of that savings will not come from layoffs, but a lot will.

“we're gonna save $6 billion over the next three years”

No plan for growth

There is no announced plan for new revenue. The strategy is shrinking and cutting costs. But growth is required to service the debt and satisfy shareholders.

The streaming merger

Skydance will likely merge Paramount and HBO into one streaming service, though not right away. Consumers will still know Paramount, Warner Bros. and HBO as brands in the near term.

The film production mandate

To settle an antitrust lawsuit, Skydance agreed to produce thirty films per year or pay thirty million dollars per film missed into union healthcare and retirement funds.

The production target rises

After two years, the requirement goes up to thirty-two films per year. If Skydance misses that target, it must sell its forty-nine percent stake in Miramax.

California's weak settlement

Governor Gavin Newsom and Attorney General Rob Bonta caved to Ellison's threat to move to Nashville. The settlement contains all the stuff Ellison was already proposing.

Ynon Kreiz as co-CEO

Ynon Kreiz, formerly CEO of Mattel, is co-CEO of Skydance. David Ellison is the CEO. Kreiz will be paid fifty million dollars this year and handle the unpleasant work.

Kreiz's track record

Kreiz ran Maker Studios and sold it to Disney, a deal now considered a failure. At Mattel, he cut twenty-two percent of the workforce and put together the Barbie movie deal.

Streaming leadership conflict

Cindy Holland, who pioneered Netflix's original programming, runs Skydance's streaming service. Casey Bloys, who runs HBO, made clear he would not work with or for Holland.

The AI threat to content

Generative AI makes it cheap and easy to create content that mimics studio IP. Anyone can make videos of Heath Ledger's Joker and Christian Bale's Batman doing Justin Bieber songs.

The attention economy problem

The real threat is not copyright infringement but competition for attention. Anyone can make content that captures attention on Instagram and TikTok for free.

The Ellison family's other bets

Larry Ellison owns a chunk of TikTok and has bet Oracle's future on AI and OpenAI specifically. The same family funding Skydance is funding the technologies that threaten it.

The OpenAI paradox

If OpenAI succeeds at the level necessary for the Ellison family to stay wealthy, they will have profited from IP theft and created tools that make studio content worthless.

Netflix's failed bid

Netflix bid for Warner Bros. and won the deal in December. They gave up in February. David Ellison then did his regulatory arbitrage and made the deal happen.

The question remains

No one has succeeded in buying Warner Bros. Ellison has the money and time, but faces debt, shrinking markets, AI competition and a requirement to make thirty films yearly with no growth plan.