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Hello and welcome to Decoder. I'm Nelai Patel, editor-in-chief of The Verge, and Decoder is my show about big ideas and other problems. Today, let's talk about the big Paramount Warner Brothers Discovery merger. This deal could reshape all of media and entertainment if and when it closes. That's still an if, which we're going to come back to. Right now, Paramount Head David Ellison is very much acting like he's over the finish line after outbidding Netflix, which walked away after what seemed like a done deal.

There's a lot going on here, including the biggest question I've had throughout this entire saga.

Why would anyone want to buy Warner, which has basically killed every acquirer it's had

for the last quarter century? I'm serious. First First AOL, then AT&T, then discovery.

A lot of people have tried to change their fortunes by acquiring Warner Brothers. Yet, while the

individuals may have walked away richer, their companies usually ended up saddled with a brutal

combination of debt and regret. So why? Why do this? And why now? Back in January, I asked Pucks Julia Alexander to

walk me through Netflix's reasoning. And today I'm digging into Paramounts with Rich Greenfield,

a media and entertainment analyst and co-founder of research firm Lightshed Partners. You'll hear me

ask Rich a lot about the structure of this deal, and the strategy that's supposed

to help David Ellison pay for it. But there's no getting around the numbers. Paramount is roughly

40 times smaller than Netflix by market cap, yet it offered to pay 30% more for Warner Brothers.

You don't need a fancy finance background to see the bigger picture here. At its core, this deal

is about debt, A lot of debt.

Paramount is borrowing tens of billions of dollars to make this deal happen. It has nowhere close to the amount of money needed to buy Warner for the price it had to offer to scare away Netflix.

A vast majority of that money is coming from David Ellison's billionaire debt, Larry Ellison, the founder of Oracle.

His personal fortune depends almost entirely on his Oracle stock, the same stock that's tied

up for better or worse with a high height.

So why is Larry Ellison willing to trade his lucrative Oracle shares for shares in a media

company?

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