Larry Ellison’s extravagant present for his grown son

Media is all about aspirations, and Larry Ellison’s son is aiming high. This might shed light on the puzzling rationale behind Paramount Skydance’s bid for Warner Bros. Discovery.

In October, Warner Bros. announced it was up for grabs, sparking several offers. The key contenders were Netflix and a duo of well-connected individuals: David Ellison and Jared Kushner. David, who leads Paramount, is best known as Larry Ellison’s son, while Jared is recognized as Donald Trump’s son-in-law, having taken over his father’s business during a legal stint.

Netflix emerged victorious, striking a deal to acquire most of Warner Bros. for $83 billion, including debt. This amount is over five times Paramount’s market cap. Warner Bros. believed that splitting into two entities—one for Netflix and another for its cable networks—would yield shareholders a value of $31 to $32 per share, compared to the $30 per share Paramount was offering.

Despite this, Paramount launched a hostile takeover bid for Warner Bros. at $30 per share, totaling $108.4 billion, debt included. Paramount has reportedly been eyeing Warner Bros. for two years, even before the Ellison duo entered the fray. Now, they’ve backed their bid with the Ellison family trust, which holds around 1.16 billion Oracle shares. The current offer from Paramount isn’t the final word, according to reports, suggesting this drawn-out battle is far from over.

Let’s take a moment to consider the logic behind Paramount’s actions, which seem questionable at best. While there might be a case for consolidating streaming services, merging HBO Max with Paramount Plus doesn’t seem to offer a significant advantage, especially since HBO Max’s library isn’t particularly exclusive. Why would Larry Ellison exchange Oracle stock, valued for its tech potential, for media assets that don’t hold the same promise? If he’s serious about this, I’d love to know what he’s thinking.

Warner Bros. also appears skeptical about Larry Ellison’s commitment. One reason they chose Netflix was concern that he didn’t personally guarantee the bid and was planning to fund it through a trust that could be altered at any time. That’s a valid concern!

Moreover, it seems Larry Ellison isn’t fully sold on his son’s vision, as the deal relies on external funding, including $24 billion from three Middle Eastern funds, alongside contributions from Kushner’s Affinity Partners and Apollo Global Management. Larry’s trust is merely a backup for this financing.

Still, Larry has reached out to the White House to express antitrust worries regarding the Netflix-Warner Bros. deal, which is noteworthy.

You might be curious about David Ellison’s justification for merging Paramount and Warner Bros. He stated, “Unless you can build a tech product that is truly competitive with what’s coming out of Silicon Valley, you can’t compete.” He believes legacy media struggles because it lacks the necessary tech skills, emphasizing that great content must work in tandem with technology to drive growth.

This perspective seems misguided. In an open letter about Skydance’s acquisition of Paramount, David proposed merging Pluto TV with Paramount Plus—an idea that feels underwhelming. He also mentioned plans to leverage AI to enhance the company’s intellectual property and content. It sounds like he’s suggesting that directors should focus on creating content for an algorithm rather than for audiences. Improving recommendations might involve adopting a TikTok-like algorithm, especially with his father’s influence—if that deal ever materializes. This seems to be the crux of the Paramount pitch, which likely extends to Warner Bros. as well.

David’s strategy for Paramount reveals two things: he wants the Netflix valuation for his company, and he seems to lack a solid understanding of the industry.

If I were to pivot Paramount into a tech-focused entity, I’d explore linking product placements in its existing library to actual shopping, charging brands a fee and taking a cut of sales. I’d also consider enhancing streaming speed and reliability or developing new compression methods to reduce delivery costs. Perhaps I’d even venture into streaming video games, tapping into a massive market—something Netflix is currently pursuing. To achieve any of this, I’d prioritize hiring top tech talent.

Instead, David’s notable hire is Bari Weiss, who has been more focused on media appearances than effectively running a news organization. It’s amusing that David has promised the White House he’ll transform CNN in a way similar to what he did with CBS News, essentially offering to pay a premium to hasten the decline of the TV business.

We could delve into the cultural implications here: both Ellisons seem to align with Trump’s agenda to undermine what they perceive as a left-leaning media landscape. However, from a business standpoint, this approach is misguided. Broadcast TV has been losing relevance for some time, with streaming now accounting for nearly half of monthly TV viewership. In the streaming landscape, only Netflix and YouTube truly matter, collectively holding over 20 percent of the TV audience, while broadcast TV represents 23 percent. Paramount Plus and Pluto TV together capture about 2 percent of the market.

Netflix is effectively drawing viewers away from cable and broadcast. David Ellison’s grand strategy to compete involves merging streaming platforms and making vague references to AI—without any concrete ideas, it’s unlikely Paramount will see a Netflix-like valuation.

Now, let’s look at Netflix, which genuinely operates as a tech company. Comparing the two deals is complex since Paramount aims to acquire all of Warner Bros., while Netflix seeks to divest its declining cable assets, including CNN. This could be a smart move! Netflix stands to gain a vast movie library without the hassle of negotiating rights, potentially generating royalties if it chooses to license to competitors. Historically, Netflix hasn’t pursued this route, which could give consumers a compelling reason to switch services.

In contrast, it’s unclear what the Ellisons are aiming for. Merging with HBO Max could create a more robust streaming service, but it would only increase Paramount Plus’s market share from 2 percent to 3.5 percent. Paramount could also make exclusive content available on its platform, but it already has a library and the means to produce more. Is David Ellison merely trying to buy his way to relevance?

One more point about Netflix: it has two CEOs—Ted Sarandos, who knows Hollywood, and Greg Peters, who focuses on tech. David Ellison lacks expertise in either area. Before founding Skydance, he personally financed a third of the $60 million budget for the film Flyboys, which co-starred him and James Franco, but it only grossed $18 million. After that, he started Skydance, with his father investing $150 million of the initial $350 million raised to finance films with Paramount. Skydance’s track record has been mixed, with successes like True Grit and failures like Terminator: Dark Fate. David stepped away from acting in 2010 after a co-star dropped out of a project he had written.

Now, David seems to aspire to be a mogul on par with industry giants like Sumner Redstone or Rupert Murdoch; we might be witnessing a real-life Kendall Roy scenario. The pressing question is how committed Larry Ellison is to fulfilling this dream for his son. He was involved in the initial Warner Bros. negotiations and reached out to the White House to challenge the Netflix deal, but neither of these actions equates to a serious investment of Oracle shares. Acquiring Warner Bros. won’t effectively transition Paramount into a tech company, either. Like Warner Bros.’ board, I doubt Larry Ellison will trade Oracle shares for a media company—it simply doesn’t add up.

Under what circumstances might Larry Ellison decide to proceed anyway? Two possibilities come to mind, both related to Oracle’s significant investment in AI, which has led to a considerable debt load. The company is spending heavily to expand data centers, banking on revenue from OpenAI, which may not meet its financial obligations.

We’re in an era of intense tech regulation. Acquiring CNN’s parent company, which Trump despises, and reshaping it to align with his interests could provide Larry Ellison with the political leverage needed for a bailout if OpenAI falters. It might also position him favorably for federal contracts. For a president who is captivated by television, owning a couple of channels could be a powerful form of lobbying. However, if this is the case, Paramount’s bid for Warner Bros. isn’t about transforming a media company into a tech entity—it’s about finding another way to curry favor with a deeply corrupt administration. It’s also a risky bet that Trump’s opposition won’t gain power anytime soon.

The second possibility is that Larry Ellison has already realized AI may not live up to its hype. If that’s the case, he might as well spend while he can. Perhaps buying his son’s affection is worth the investment. After all, Larry is already Paramount’s largest shareholder. Why not expand the playground a bit?