Larry Ellisons big dumb gift to his large adult son

Media is a business about dreams, and Larry Ellison’s son is dreaming big. This might explain why the case for Paramount Skydance to buy Warner Bros. Discovery is so incoherent.

In October, Warner Bros. put itself up for sale, leading to a number of bids. The two we are concerned with are a bid from Netflix and another from two nepo babies: David Ellison and Jared Kushner. David Ellison is the head of Paramount, but most famous for being Larry’s son. Jared Kushner is most famous for being Donald Trump’s son-in-law, though he also got his start in business by taking over his felon father’s firm when Charles was in prison; his firm is involved in the financing.

Netflix won the bidding. Warner Bros. made an agreement to sell most of its business — the studio part — to the streaming giant for $83 billion, including debt. (That figure is a bit more than five times Paramount’s market cap.) Warner Bros. felt that spinning itself into two companies, the Netflix acquisition and the cable networks, gave shareholders a value of $31 to $32 a share, rather than the $30 a share Paramount was offering, according to The Wall Street Journal.

Nonetheless, Paramount announced a hostile bid to take over Warner Bros. for $30 per share, which puts the total at $108.4 billion, including debt. Apparently, Paramount has been after Warner Bros. for the last two years, even before Ellison père et fils entered the picture. But now, it’s backstopped the deal with the Ellison family trust, which includes a war chest of about 1.16 billion Oracle shares. The current offer from Paramount is not the “best and final” — at least, according to The New York Times — so this dumb fight is likely to drag on for a while.

Let’s pause here and notice that what Paramount is doing doesn’t make any fucking sense. At least, not business sense. Maybe I can see a case for consolidation among the streamers, rolling HBO Max into Paramount Plus, and acquiring a larger library. But HBO Max isn’t that big, and its library isn’t exclusive. So why would Larry Ellison trade Oracle stock (with, at maximum, AI-rules-the-world multiples) for garbage media multiples? If the elder Ellison is serious about this, I’d like some of what he’s smoking.

Warner Bros., in fact, also appears concerned about how serious Ellison senior is. Part of the reason Warner Bros. went with the Netflix bid was that its board was “worried that Mr. [Larry] Ellison did not personally guarantee the bid under his name and is planning to contribute equity for the deal through a trust with holdings that could be modified at any time,” wrote The New York Times. Yeah, I’d worry about that shit too!

And there are signs Larry Ellison doesn’t see his son’s vision as a sure thing, since he’s not the sole bankroll involved. The deal relies on third parties’ money, which includes $24 billion from three Middle Eastern funds. That’s in addition, of course, to Kushner’s Affinity Partners and Apollo Global Management, both of which manage significant money from other Middle Eastern investors. Larry Ellison’s trust, which he can change at any time, is only a backstop on this financing.

Still, Larry Ellison has called the White House to whine about antitrust concerns in the Netflix-Warner Bros. deal, which is not nothing.

At this point, you may be wondering what David Ellison’s case is for combining Paramount and Warner Bros. Here’s what he has to say: “Unless you can build a tech product that is truly competitive with what’s coming out of Silicon Valley, you can’t compete,” David Ellison said, according to The Hollywood Reporter. “And that has been one of the big problems that’s been facing legacy media, is they don’t actually understand that skill set and how critical that is, and that it is actually a combination of great content working with tech product hand in hand, that is how you actually get this business growing and scaling again, and you need both.”

This is vacuous nonsense. In an open letter about his company Skydance’s acquisition of Paramount, David Ellison pitched a plan to combine Pluto TV with Paramount Plus — wowie zowie, combining streaming platforms! There’s also some manner of plan to use AI slop to “supercharge” the company’s intellectual property and “content.” (Hear that, directors? You don’t make TV shows or movies. You make slop for the slop machine.) And improving recommendations will probably mean attempting to use the TikTok algorithm, since Daddy is involved — at least, if the TikTok deal ever goes through. So that’s the Paramount pitch. It is also, most likely, the Warner Bros. pitch.

David Ellison’s plan for Paramount, insofar as it is one, reveals two things. First, David Ellison wants the Netflix multiple on his company. Second, he doesn’t understand how anything works.

If I wanted to turn Paramount into a tech company, I might try linking product placement in Paramount’s existing library to actual shopping, for a modest fee to the brand, and perhaps a cut of any sales made. Or figure out how to make streaming faster and more reliable, or come up with new methods of compression to make delivery less costly. Perhaps I’d move into streaming video games, unlocking a huge market for my platform — which for the record is exactly what Netflix is doing right now. To do all — or any! — of that, I’d probably make a big impressive tech hire.

Instead, Ellison’s flashy hire is fellow know-nothing Bari Weiss. Weiss is the head of CBS News who for some reason is appearing on television to record flop interviews instead of doing her actual job, which is running a news organization. Hey, did you hear that David Ellison has been promising the White House it’ll do to CNN what it did to CBS News? It’s very funny that he is offering to pay a premium to drive the TV business into the ground faster, don’t you think?

I guess we could get caught up in the culture war argument: Both Ellisons simply buy into Trump’s desire to destroy the supposed left-wing bastion of TV news. (The revanchist right has been particularly infuriated by their inability to dominate cultural products as they dominate politics.) But as a business decision, it is so stupid. Broadcast TV has been declining in importance for some time now. As of October, streaming has taken over nearly half of monthly TV viewing. In the streaming wars, there are only really two important platforms: Netflix and YouTube. Those two streamers combined account for a bit over 20 percent of the entire TV audience; broadcast TV as a whole accounts for 23 percent. Paramount Plus and Pluto TV together account for about 2 percent of the market.

Netflix, as a streaming platform, is stealing viewers from cable and broadcast television. David Ellison’s big idea to compete is combining streaming platforms and making vague noises about AI — and, I guess, TV? Without any actual ideas, no Netflix multiple is going to be forthcoming on the Paramount stock.

Now let’s consider Netflix, which actually is a tech company. Making a direct comparison of the deals is slightly complicated by the fact that Paramount wants the whole of Warner Bros. and Netflix wants to spin off the declining cable holdings, which include CNN. This is probably smart! What Netflix gets in the deal is a huge movie library it doesn’t have to negotiate rights for — and which it might be able to generate royalties from, should it choose to continue licensing to rivals. Historically, though, Netflix doesn’t do that, which may mean it’ll give consumers a fairly powerful reason to switch streaming services.

By comparison, it’s just not clear what the Ellisons think they’re doing. Sure, combining with HBO Max and forming one streaming service might be helpful, but that takes Paramount Plus from 2 percent of the market to 3.5 percent of the market. Paramount could similarly make a bunch of Hollywood history exclusive to its streaming service, but so what? It’s already got movies and TV shows and the means to make more. Is David Ellison really just trying to buy his way to importance?

One more thing about Netflix. It has two CEOs: Ted Sarandos, who is Mr. Hollywood, and Greg Peters, who explicitly handles tech. David Ellison has the experience and talents of neither. Before founding Skydance, Ellison personally paid for a third of the $60 million budget for the bomb Flyboys, which costarred Ellison and James Franco. The movie made $18 million. Next, he founded Skydance, and his dad put in $150 million of the initial $350 million the company raised to finance movies with Paramount. Skydance’s trajectory has been uneven, with hits such as True Grit and stinkers such as Terminator: Dark Fate. Ellison quit acting in 2010, when Taylor Lautner backed out of a movie Ellison had written after finding out that Ellison also planned to costar.

So David Ellison took his imagination elsewhere. It seems his new vision is to become a mogul on par with Sumner Redstone, Barry Diller, or Rupert Murdoch; we’ve got a real-life Kendall Roy on our hands. The question now is how committed Larry Ellison is to buying that dream for his son. Sure, he was involved in the early negotiations for Warner Bros. Yes, he phoned the White House to try to scupper the Netflix deal. But neither of those are nearly as serious as Oracle shares. Acquiring Warner Bros. doesn’t do what’s needed to pivot Paramount into a tech company, either. So, much like Warner Bros.’ board, I don’t believe that Larry Ellison is going to trade Oracle shares for a media company. It just doesn’t make sense.

Under what circumstances would Larry Ellison decide to do it anyway? There are two things I can think of. Both of them have to do with Oracle, which has pivoted toward an enormous AI bet, taking on a tremendous debt load in the process. The company is spending a frankly shocking amount to build out data centers, based on revenue it expects from OpenAI — which may not be able to meet its obligations.

We are in the era of gangster tech regulation. Buying up the parent company of CNN, which Trump famously loathes, and reworking it to flatter him could maybe get Larry Ellison the political capital he’d need to get bailed out if OpenAI fails on its obligations. It might also get him the first line on federal contracts. Who can say? For our TV-addled president, maybe owning a couple channels is the most effective form of lobbying there is. But if this is true, Paramount’s bid for Warner Bros. isn’t about making a media company into a tech company — it’s about figuring out another way to butter up an astonishingly corrupt administration. It’s also a pretty risky gamble that no one who opposes Trump will come into power anytime soon.

The second possibility is that Larry Ellison has already recognized AI isn’t going to live up to its hype. If that is the case, he might as well spend money while he has it. Maybe buying his son’s love is worth it. After all, Larry Ellison is already the most important shareholder of Paramount. Why not expand the playhouse a little?

Correction, December 16th: The Netflix bid is worth $31 to $32 per share, not $31 to $31.