Hello, I'm Christopher Williams. I'm business editor here at The Telegraph and my guest today is Greg Peters, who is co-CEO of Netflix, which is hopefully a company you've heard of. We're especially pleased to have Greg here with us today because he's just coming off the back of one of the most dramatic takeover battles we've seen in some years. So, Greg, why go to all that trouble and risk if you were just going to back down?
Well, I'd say you don't really know how the process is going to end when you start the process. We felt it was our obligation to take a look at Warner when it came on the market, so to speak. We built a valuation model, we got excited about what we thought we could do with it and how their content, the HBO brand, would support our business. We also thought we would be really good stewards of those assets at the end of the day. And then based on that evaluation model, we placed a bid in the original part of the process. Ended up winning the deal at that point in time. And then when ultimately after some period of time, Paramount came back and actually lodged a formal bid, a competitive bid, we realized that the amount that we would have to pay to beat that exceeded where our valuation was. And so then it was pretty clear what we should go do, which is, you know, step back.
But over the months of the process, it became clear that some of your shareholders didn't like the plan very much and your share price took a bit of a hammering. It's come back up on Friday and today, but not quite to where it was. And has that given you cause for reassessing whether it was the right thing to do?
No, I think, you know, we've always felt like we don't manage to stock price, we manage to the long-term value of the business and we feel like the stock price will reflect that over time. There's certainly times, you know, our investors have been ahead of us and the times our investors have been behind us in that regard. And I think, look, I mean, it's fair that some investors, you know, were skeptical about our ability to pull off something like this. We haven't done it before. So, that's a fair point, but we feel like we do things that we haven't done before all the time. And we attempt to do them pretty well. I would say that having gone through as much of the process as we went through, I was increasingly confident by the end of it that we could have pulled this off. And when we did do that and deliver those results back to shareholders ultimately then we would have proven the folks that were skeptical that we could do it and those that had been on us in that period of time would have been pretty happy.
But you indicated there that as you say Warner is a rare asset, right? It's got some amazing intellectual property, Harry Potter, the DC universe, things that as you say don't come on the market very often. But you say nice to have, not absolutely crucial to Netflix. So what would you have done that you can't now do?
Well, let's see. Just to elaborate on that a little bit, you know, we think our fundamental job is to add more value into the entertainment offering that we have. We've got a number of vehicles to go do that. We license content from partners all the time. We produce original shows. We do occasional partnerships like we're doing with TF1 in France as an example where we're bringing all their content on. And this represented what I would characterize as a rather exotic and unusual way or maybe an uncommon way to actually do that same mission of adding more entertainment value. To your point, they've got some amazing IP, amazing stories and we felt like bringing that on board would be a great way to add more value. Now, since we don't have that opportunity now, we're going back to all those other mechanisms that we have available to us and continue to grow via those approaches.
And the Ellisons, for those who aren't familiar, are worth hundreds of billions of dollars thanks to Larry Ellison's founding of Oracle, the database software maker. Very exciting. Worked hard through this process to present themselves as the Trump-friendly face of Hollywood. You know, they thought they were in a political fight. Netflix, you seem to not believe you're in a political fight. Were they wrong and you were right?
Well, I think for them they felt like they could compete, you know, on politics. And so I also think that, you know, frankly, some of the political noise you heard around this deal was engineered, designed to improve that competitive advantage. But we always felt two things maybe that are important to us. We don't believe we're a political company. You know, our job is to satisfy hundreds of millions of people around the planet who have a very diverse set of tastes. And so our job is to deliver entertainment that speaks to all of those needs. So that, by necessity, we can't have a political point of view to do that effectively. And the other thing too is we felt ultimately, you know, when it came to the regulatory process or where governments get involved in the approval of the deal, we felt we had a very strong fact-based argument about why this was not a competitive concern. And we felt that we would ultimately win on those facts.
Just to push back on that a little bit, I mean, lots of Republicans and people in DC would say Netflix is a culturally liberal company, even if not operationally. You know, some of the partners you guys have done deals with, the Obamas, Harry and Meghan, are not the president's favorite people. How do you answer to that?
We do partnerships with a huge range of folks and we do partnerships with folks that, let's say, the more progressive parts of the society get mad at us for doing those deals like Dave Chappelle. We had a very famous dust-up with progressives on some of the content that he produced. But we think our job again is to work with a wide range of folks. We believe in artistic expression. We believe that our job ultimately is satisfying the entertainment needs and desires of our members and those are quite wide and so when it comes down to what's our business motive, what's our operational approach, it's to satisfy that wide range.
But one thing that happened later in the process was that Susan Rice, who's a member of your board and a former Obama and Biden official, made some comments that prompted Trump to get on his Truth Social and demand that she was sacked. That's unusual.
Yeah, I think it's unusual. But again, you know, there's lots of things that happen in that social media sort of rhetoric zone that I would, you know, characterize as maybe less substantive in intent.
Okay. So, is it your modeling that $111 billion would be too much for Netflix? Do you think it's too much for Paramount and what are the consequences of that going to be?
Well, I can't speak to Paramount's model, but a lot of our model was based on our ability to connect the content that Warner Brothers had with a bigger audience. And so I don't think Paramount has that bigger audience. So, I think, you know, sort of first principles to answer your question is I don't know how they make that model work.
Right. And as a customer of Paramount and of Warner, does it give you cause for concern? You know, Netflix licenses huge amounts of content from both those people. Them coming together is going to change the way they operate.
Perhaps. I, you know, maybe though part of answering the question of how do they make that model work is that the likelihood, I think the reality that they're going to have to license. To your point, we license from both of them already. So, we're in business. And I think, you know, certainly the Hollywood part of the industry has a long history of, you know, call it coopetition in that regard. So I anticipate that we'll have robust licensing possibilities from both companies or the combined company.
It's been a pretty rough few years for the entertainment industry. You've had the pandemic and Hollywood strikes and the LA fire. This is going to be another tough thing, isn't it? It's going to be a lot of job losses. And if you were working for Warner in the UK, which is thousands of people, you'd be quite worried today, wouldn't you?
Well, I'd say, look, I personally carry a bit of anxiety about the outcome and where we landed. As I said, I thought we would have been good stewards for the assets. I do think there'll be more job losses going down this path and that's unfortunate and sad.
But there are people in the last few days who've analyzed this and said, well perhaps this was Netflix's plan all along, right? So it was kind of make them pay up, saddle them with loads of debt, a regulatory gauntlet to run. Is that true?
No. I would say we thought this was the right thing to do for our company to bid on it. But to bid on it to the value that we thought we could get from it. And then not to bid any further. But it wasn't some magic complicated plan to get to this place.
And looking forward, it does create a much stronger streaming rival to you, doesn't it? I mean, they have all that content and the combination of HBO and Paramount and all the rest of it is a bit more of a challenge to Netflix, which has been number one for a long time now.
Well, I'm not so sure how much stronger they are. I mean, at the end of the day, it'll come down to their ability to actually bring these titles to broader distribution and to grow. So, we'll see how it goes. But, you know, neither company is particularly large at this point in time. But again, that's why I think that they'll inevitably do things like we'll license from them to give them some supplemental distribution reach and things like that. And at the end of the day, there's other bigger competitors out there, folks like YouTube that, you know, I think probably are more worthy of our attention.
Sure. One of the unusual things though about Paramount's bid is it relies not only on Silicon Valley wealth but also Gulf wealth. You've got Saudi Arabia, Qatar and the UAE all putting up billions to help fund this deal which is a big pile of debt as well. Now we at the Telegraph have got some relatively recent experience of this new trend of Gulf States seeking to invest in media. In our case the government blocked an attempt by the UAE to invest in the Telegraph. It seems unlikely that the US will intervene in a similar way. Do you think that's right? And what does the sort of involvement of state capital in your industry mean? Are you comfortable with it?
Well, I would say you're more an expert on this than I am. So yeah, I would, you know, seek your opinion to some degree as well here too. But you know, for us, we didn't actually, from a practical perspective, we had no Gulf State money involved in our bid. So we didn't really essentially assess the regulatory impact. Remember this is a deal that has to be approved in 50 plus jurisdictions, right? So there's lots of jurisdictions that'll have a particular perspective on it which I can't speak to how they'll think about that involvement but I imagine whether it's CFIUS or here in the UK with CMA and Ofcom will take a look at the involvement, where the money comes from and understand what does that mean about the deal.
Do you think that they've got a sort of regulatory political gauntlet to run? I'm thinking of the conflict in Iran where three of their investors are on the front lines. You've got midterms in November in DC which could change the political calculus on the hill. It's not done.
Look, a deal of this magnitude should be inspected by regulators. I think that's appropriate. That's what we expected was going to happen with us. It's what we expect will happen here. Again, to your point, there's a lot of shifting perspectives that might influence how that happens. So, you know, we'll see. It's hard for me to predict how that will happen.
Sure. And for Netflix, this was an unusual thing to be involved with, right? The history of the company is not big M&A. So was this a one-off? Do you go back to the drawing board and look for something else or is Warner just a special thing that you wanted?
