Received this email from a friend? Sign up here.

TGIF! We're running a little late today for obvious reasons 😀 Here's the latest on Netflix's deal with Warner Bros. Discovery, plus Dan Bongino's candid admission, Matt Murray's robust defense, and some great weekend reads...

Netflix wins WBD bidding war

This is a David and Goliath story – with a twist.

Almost exactly 15 years ago today the owner of Warner Bros. and HBO pushed back on Hollywood and Wall Street hype about a streaming upstart named Netflix.

The Jeff Bewkes quote in Tim Arango's NYT story is now infamous: "It's a little bit like, is the Albanian army going to take over the world? I don't think so." The headline is memorable too: "Time Warner Views Netflix as a Fading Star."

Bewkes wisely sold Time Warner six years later, as Netflix's star got brighter and brighter, and every old-line entertainment company pivoted to become a streaming company. Now the Time Warner assets are controlled by Warner Bros. Discovery, which just agreed to sell Warner Bros. and HBO to Netflix.

This is a blockbuster deal. (Get it?) Netflix was the David. Now it's the Goliath. Oh and by the way: There are a couple different "David & Goliath" movies streaming on Netflix.

So here's what is happening: Warner Bros. Discovery (WBD) is moving forward with its plans to split into two publicly traded halves. Once the split takes effect, likely sometime next summer, Netflix intends to acquire the Warner half. The other half, Discovery Global, will house CNN and other channels.

The regulatory review process is going to take a long time – in the US, EU, and elsewhere. And Paramount is signaling that it may fight tooth and nail for WBD. But for the moment, at least, Netflix has triumphed. The streaming king has a plan to get even bigger.

Surprise turn of events

Paramount was thought to be the frontrunner in the auction for WBD. David Ellison's allies exuded confidence about their merger proposal – and their mutually beneficial relationship with President Trump. But things clearly changed in recent days. Paramount's letter to the WBD board expressing "grave concerns" about the auction process was a possible precursor to a hostile-takeover play.

Officially, Paramount is not commenting this morning.

So what happened? Sources familiar with the matter told me yesterday that Netflix came in with superior bids – and agreed to the same costly breakup fee that Paramount proposed.

Netflix co-CEO Ted Sarandos acknowledged the shock on a call with Wall Street analysts this morning. "I know some of you are surprised that we're making this acquisition. And I certainly understand why. Over the years we have been known to be builders, not buyers," Sarandos said. "But this is a rare opportunity, and it's going to help us achieve our mission to entertain the world and to bring people together through great stories."

For the financial details and Netflix's PR positioning, you can read the press release here...

This is just the beginning

This deal could be held up for months, and even years, in DC, either by Trump loyalists carrying out his wishes or by bureaucrats with genuine objections to media consolidation. CNBC is already quoting an anonymous senior administration official saying the Trump admin is viewing the deal with "heavy skepticism." Here is Eamon Javers' reporting about that.

Trump can make the process more painful, but he does not get a literal veto. Remember when the Justice Department in 2017 sued to stop AT&T's acquisition of the aforementioned Time Warner? The companies fought the case in court and prevailed.

Netflix sure seems willing to stomach a similar legal battle. Or, at the very least, willing to go through the motions. "What's more valuable to Netflix," Alex Sherman posited this morning, a $5 billion breakup fee payout "or keeping WBD away from Paramount and Comcast for two years?"

Indeed, the DOJ intervention in 2017 had the effect of slowing down HBO at a time when it desperately needed to speed up its competition with Netflix.

Also: It's critical to remember the US is just one of many markets that will take a close look at the transaction. European regulators will have a lot to say...

Alarm in Hollywood

Netflix execs are laying out their pro-deal arguments, asserting that the assets are complementary in nature and that the deal will create "more opportunities for the creative community."

Many entertainment industry heavyweights have already heaped doubt on that. 

Yesterday Jane Fonda spoke for many in Hollywood when she wrote that any Warner Bros. sale "would be catastrophic for an industry built on free expression, for the creative workers who power it, and for consumers who depend on a free, independent media ecosystem to understand the world."

Cinema United, a trade association representing movie theater owners, said the deal "poses an unprecedented threat to the global exhibition business," given Netflix's aversion to theatrical releases. The response from Sarandos this morning: Warner Bros. will keep releasing films in theaters. And/but "over time," release windows "will evolve to be much more consumer-friendly."

I think it helps to think big-picture about the Big Tech players involved here. Netflix is thinking about threats from Google, Amazon, etcetera. It views Google's YouTube as a primary rival for attention now. "With Google increasingly entering the market, this deal may serve as a strategic blocking and tackling maneuver," Melissa Otto, head of research at S&P Global Visible Alpha, pointed out.

A few more Netflix notes & quotes

 >> This sale "reflects the realities of an industry undergoing generational change," WBD CEO David Zaslav said in a memo. THR has published it in full here.

 >> "People are shook" inside the Warner Bros. studio, a top exec told Borys Kit.

 >> "Responses to the deal vary considerably," Deadline's Andreas Wiseman wrote after surveying international media execs.

 >> "This deal looks like an anti-monopoly nightmare," Sen. Elizabeth Warren said in a statement just now. 

 >> "The Albanian army just took over the world," analyst Rich Greenfield said, calling back to the Bewkes quote.

 >> Let's end this section where we started, with a Goliath reference: "The transaction is largely going to hinge on how regulators in the U.S. and elsewhere define the company's market," Andrew Ross Sorkin wrote in DealBook. "If it's narrowly defined as subscription streaming, the deal could be blocked. But if it’s defined in larger terms — like eyeballs on video, which would include YouTube and others — the combined company doesn’t look like such a Goliath."

IN OTHER NEWS...

WaPo calls out White House's 'targeting of journalists'

The White House continues to promote its new "media offenders" website. Yesterday it put out a video identifying the Washington Post as this week's "top" offender. WaPo executive editor Matt Murray decided to issue a forceful response.

"Let's be clear what's happening here: the wrongful and intentional targeting of journalists by government officials for exercising a constitutionally protected right," Murray said. "The Washington Post will not be dissuaded and will continue to report rigorously and accurately in service to all of America."

Pentagon's terse response to NYT suit

Chief Pentagon spokesman Sean Parnell, one of the defendants in the NYT lawsuit that we led Reliable with yesterday, responded with a short statement after we published. "We are aware of the New York Times lawsuit and look forward to addressing these arguments in court," Parnell said. 

Bongino's candid admission

Andrew Kirell writes: Dan Bongino said the quiet part out loud about his MAGA media career last night, just hours after the FBI arrested the alleged Jan. 6 pipe bomber. Pressed by Fox's Sean Hannity about his Nov. 2024 assertion that the case was "a massive cover-up," a "setup," and potentially an "inside job," Bongino made this casual admission: "Listen, I was paid in the past for my opinions. And one day I will be back in that space, but that's not what I'm paid for now. I’m paid to be your deputy director, and we base investigations on facts.” He then quickly pivoted to bashing the media and the Russia "collusion hoax..."

Tony Dokoupil in line for 'CBS Evening News' chair?

That's what New York Post reporter Alexandra Steigrad reported last night, and it makes tons of sense. "Dokoupil has been a frontrunner for the job and a favorite of both Bari Weiss, the network’s editor in chief, and Tom Cibrowski, its president," she wrote.

Yesterday "Evening News" co-anchor Maurice DuBois said he's departing the network in two weeks. The program's other anchor, John Dickerson, previously said he's leaving too, so CBS needs to find a replacement stat. DuBois has yet to share his next plans. I wrote about the departure here…

Fox snags Erika Kirk before CBS

CBS announced the plans for a Bari Weiss-hosted prime time town hall with Erika Kirk yesterday, but then Fox News made sure everyone knew that Kirk will be on Fox first. Variety's headline: "Fox News Sets Six Appearances for Erika Kirk Next Week."

Todd Spangler wrote that the hits are "part of the book tour" for her late husband Charlie's book, "Stop, in the Name of God: Why Honoring the Sabbath Will Transform Your Life," which comes out on Tuesday. Among the Fox stops: A sit-down with Sean Hannity and a full hour on "Outnumbered."

AI byline joins BI newsroom

In a note, Business Insider chief editor Jamie Heller said the publication is kicking off AI News Desk, a month-long pilot that will see BI "publish a few stories a day" using a custom GPT that’s been trained "to use only stories we select from our archive, along with a piece of news, to create a story written in our style and built from our coverage." The AI-penned stories, which will have an AI byline, will be edited by a human editor...

Meta's big AI news deals

This morning Meta announced "it has struck several commercial AI data agreements with news publishers ranging from USA Today, People Inc., CNN, Fox News, The Daily Caller, Washington Examiner and Le Monde," Sara Fischer scooped for Axios. "The new agreements allow Meta to access content from its partners to provide real-time answers to user queries about news and current events in its Meta AI chatbot," Fischer noted. "Over time, the company plans to add more news partners and topics while expanding new features for users looking to access to real-time information."

Chicago Tribune & NYT sue Perplexity

Liam Reilly writes: In the last 24 hours, The New York Times and The Chicago Tribune have both slapped Perplexity AI with copyright infringement lawsuits.

The Tribune's lawsuit, filed Thursday, accuses Perplexity of using "outputs that are identical or substantially similar to the Chicago Tribune’s content." Perplexity, the lawsuit challenges, has "unlawfully copied millions of copyrighted Chicago Tribune stories, videos, images, and other works to power its products and tools.” Here's the Tribune's own story on the suit.

The Gray Lady's lawsuit, filed this morning, accuses Perplexity of "large-scale, unlawful copying and distribution of The Times’s copyrighted content." And here's the Times' own story on the complaint...

Headlines from Versant's investor day

 >> MS NOW "plans to launch a membership-based, direct-to-consumer product next summer."

 >> Fandango will be expanded "into an ad-supported service."

 >> CNBC "is teaming up with Kalshi to bring real-time prediction data across the business news outlet's TV and digital channels." Oh, and CNBC has a new logo. Some people say it looks like the N is pointing down – a sour sign for a business brand. Others say it's obviously supposed to be an arrow pointing up. What do you see? 

Some great weekend reads…

 >> Jeremy Barr asks: “Is Olivia Nuzzi’s nascent Vanity Fair comeback already over?” (The Guardian)

 >> Michael Calderone says Los Angeles "is on the cusp of a local news boom." (TheWrap)

 >> Brian Steinberg goes "inside NBC's push to win new ground in TV's evening-news battle." (Variety)

 >> John Herrman's question about OpenAI: "What happens when the avatar of the AI boom starts to lose its juice?" (NY Mag)

 >> Eric Rynston-Lobel describes how "nonprofit and for-profit news networks are expanding local news in places that need it." (Local News Initiative)

 >> Stephanie Palazzolo explores "AI's 'split-brain' problem." (The Information)

 >> Angela Yang highlights recent research about heavy consumption of short-form video being associated "with poorer cognition, especially in regard to attention spans and impulse control." (NBC News)

 >> Pam McClintock writes of Paramount, "It's a brand-new day at the legacy studio, where prestige films are out, testosterone-heavy tentpoles are in and Brett Ratner is back on the call sheet." (THR)

Briefly…

 >> TBPN just struck a deal with the NYSE. And "has almost sold out of its ad inventory for next year," Kerry Flynn writes. (Axios)

 >> The New Yorker is now on Substack, and leaning into the platform's "unique features: comments, chat, a relationship between writer and reader," Emily Sundberg writes. (Feed Me)

 >> "Dozens of unionized New Yorker staffers protested a screening of the new Netflix documentary, 'The New Yorker at 100,' on Thursday evening in response to parent company Condé Nast’s recent controversial firings," Casey Loving and Alyssa Ray report. (TheWrap)

Today's tech talk

 >> "Elon Musk's social media company X was fined $140 million by EU tech regulators on Friday for breaching EU online content rules, the first sanction under landmark legislation which will likely draw the U.S. government's ire," Foo Yun Chee reports. (Reuters)

 >> “EU regulators launched an antitrust investigation into Meta on Thursday and may even temporarily halt its rollout of artificial intelligence features in its WhatsApp messenger that would block rivals, hardening Europe's already tough stance on Big Tech,” Foo Yun Chee, Mrinmay Dey and Rishabh Jaiswal report. (Reuters)

 >> The FCC "said Thursday it has approved AT&T's deal to buy some wireless spectrum licenses from U.S. Cellular in a $1.02 billion deal," days after AT&T "committed to end DEI programs." (Reuters)

 >> Meta's stock jumped on the news, scooped by Kurt Wagner, that "Mark Zuckerberg is expected to meaningfully cut resources for building the so-called metaverse, an effort that he once framed as the future of the company and the reason for changing its name from Facebook." (Bloomberg)

 >> TikTok "is introducing a new 'Nearby Feed' to allow users to explore what’s happening around them." (TechCrunch)

 >> This year's Spotify Wrapped "saw over 200 million engaged users within the first 24 hours, 19% more than last year's AI-centered flop." (TechCrunch)

This edition of Reliable Sources was edited by Andrew Kirell and produced with Liam Reilly. Email us your feedback and tips here.