Universal Needs To Act Like Steve Cohen And Overpay For Warner Bros.

So let me set the stage for the non-sports fans who may be reading this. Five years ago, almost to the day, Steve Cohen bought the New York Mets from the Wilpon family for several billion dollars. This was something long-suffering Mets fans were very excited about because the team had a problem retaining high-value talent for decades because the Wilpon family was unwilling to pay for marquee players. The implicit promise was that Cohen would use his independent wealth to attract better players to the team through a willingness to pay a ton of money for the players.

The first real test of his tenure as owner with this new governing philosophy for the team was the free agency of Shohei Ohtani, arguably one of the greatest baseball players of all time and definitely the best player in the league right now. Unfortunately for Mets fans, the money offered by Cohen and the Mets was not enough to bring him to New York and instead he signed with the Los Angeles Dodgers. A year later, Juan Soto similarly entered free agency after a stint with the New York Yankees, and the Mets signed a ridiculously over the top contract for him that was arguably more than they should have.

The consensus among fans was that Cohen overpaid for Soto because he wanted to reassure fans that he was willing to spend the money to improve the team and he didn’t want to lose out on a second massive free agent.

So let’s look back to 2019, about halfway through the year 20^th Century Fox was put up for sale with the intent that Disney would buy the company. When the news broke publicly, both Comcast and Apple made bids, but both ultimately lost out to Disney. The situation is slightly different now considering all the bids that are being fielded by Warner Bros. are unsolicited but after news broke that Paramount, now owned by Skydance, was making multiple bids for the company, both Comcast and Netflix have thrown their hats into the ring for a potential acquisition of the company.

As I’ve said before, we shouldn’t be rooting for acquisitions at this level because they lead to stagnation, job loss, and an easier avenue for bad actors to turn storied newsrooms into propaganda arms for the government, but in a world where Warner Bros. is entertaining bids to sell off its assets, the best outcome for us as consumers would be the acquisition of the film and television holdings by Comcast.

For starters, there’s a lot of ego in play for the merger and acquisition prospects of Warner Brothers/Discovery. David Zazlov, head of the company, came up through the Discovery side of things and built a name for himself reshaping channels (for better or largely worse) like TLC, Food Network, and HGTV. His legacy there matters to him so he’s way more careful with what becomes of it than he is with Warner Bros. Zazlov plans to split the companies up, back to the form they were in before he acquired Warner Bros., and is interested in selling the Warner Bros. side of things, not the cable channels and other aspects of Discovery that he feels is a company built in his image. Paramount is really only interested in the Discovery side of things, not for Food Network, HGTV, or TLC, but for CNN and the cable networks like TBS and TNT and the related sports rights. Inherently, this is going to be a harder sell.

On the other side of things, Comcast and Netflix are both interested in the Warner Bros. intellectual property like the DC Universe, Harry Potter, and the entirety of HBO. That would be a much easier sell and would remove some of the regulatory hurdles since it wouldn’t involve television channels and by extension the FCC. There is still anti-trust regulation, but that’s a conversation for an administration that cares about that sort of thing.

Netflix has the market permeation where they can generate their own original content and also buy both large independently produced films and the rights to produce movies and shows based on popular books. Paramount on the other hand is already flush with profitable IPs like Star Trek, the franchises on Showtime, whatever nonsense Tyler Sheridan is working on, Transformers, SpongeBob, and Teenage Mutant Ninja Turtles. If it got to the point that Paramount was interested in just the Warner Bros. side of things, something I suspect is not the case because they want CNN and the cable networks, it would be more of a prisoner’s dilemma situation where they are buying it to keep it away from the competition.

So of the three companies vying for the control of the Warner Bros. IP, the largest strategic advantage to come from an acquisition lies with Comcast. Peacock does not have the catalog to meaningfully compete in the streaming marketplace so HBO and HBOMax are a massive asset that would substantially solve that problem. On the theatrical side of things, Universal has had success (against all laws of rationality) with the continued adventures in the Jurassic Park and Fast and Furious, but outside that and Dreamworks and Universal, they don’t have a ton to keep them competitive. This is also speculation on my part but I assume there is a licensing deal in place between Universal and Warner Bros. now for use of the Harry Potter IP in Universal Studios parks which may not be an issue anymore if Universal buys the studio.

Consolidation is dangerous and will lead to long-term issues, but if Warner Bros. is considering offers for its assets, the best thing we as the audience and consumers can hope for is a market situation that is conducive to competition. Paramount is clearly making moves to try and monopolize media so companies like Comcast, Disney, and Netflix need to step up to keep them from their market share becoming too large. We shouldn’t be in a situation where we have to decide which billionaire to back because they appear in this moment to be willing to at least pretend to care about the public interest, but that’s where we are.

Universal needs Warner Bros. for the same reason the Mets needed Juan Soto. Maybe the transaction won’t work out the way they think or it’ll take a few years for the investment to pan out but you cannot allow someone else to make that deal. Putting aside the issues with Paramount’s authoritarian tendencies, you’re going to look foolish as a studio when Showtime is presenting the Harry Potter reboot or Netflix is handing the keys to DC Studios back to Zack Snyder to further stroke his ego while you’re trying to find something to fill the Wicked-sized hole in your lineup.