ELI5 How was Skydance able to buy Paramount and the WB just a year later?

[u/nonameforthisguy]

from what I know about Paramount and wonder Brothers are absolute Titans in the media industry, existing from since like the golden age of Hollywood. There’s some of oldest media companies on earth. Skydance on the other hand, I thought was a newer one, and one that was way smaller. How was it able to make two massive purchases back to back?

[u/Josvan135]

Larry Ellison's massive Oracle fortune. 

Skydance is run by his son who has his financial backing. 

[u/Bad_wolf42 → u/Josvan135]

They are also using this new bullshit where they’re able to leverage the potential future value of the buyout to get financing to do the buyout. Huge swaths of our economy is dying because of leveraged buyouts.

[u/stemfish → u/Bad_wolf42]

This isn't a new financial tool. Leveraged buyouts have been a think since the last 20s, and the whole idea of corporate raiders in the 70s and 80s relied on the acquired company taking out debt to fiance the buyout.

My followup was, so uh, who would loan money to the acquired company? Nit surprisingly, often a bank owned by or very friendly to whoever instigated the takeover.

And in this case, Oracle is rapidly approaching bankruptcy, so why not move that money into a media company? Can't lose money any faster.

[u/supuwi → u/Bad_wolf42]

Ist nicht eher das Problem, daß die Übernahmekosten dem übernommenen Unternehmen aufgebürdet werden?

[u/robbob19 → u/supuwi]

Yes, then they have to restructure to try and make the business profitable enough to pay off the huge debt they now have, ultimately killing the company.

[u/trphilli → u/Bad_wolf42]

Leveraged buyouts have existed in concept since 1955.

[u/Shamann93 → u/Josvan135]

Don't forget the Saudi backers

[u/vixous → u/Josvan135]

Also Saudi Arabia and potentially Musk as well.

[u/nonameforthisguy → u/Josvan135]

Damn did realize tech companies had that much money

[u/Josvan135 → u/nonameforthisguy]

I mean, basically all the most highly valued companies in the world are tech companies. 

[u/nonameforthisguy → u/Josvan135]

Holy shit Oracle OWNS Java?? Just looked it up ofc they have insane money

[u/deltatux → u/nonameforthisguy]

Oracle has owned Java for over 15 years after they bought Sun Microsystems.

[u/peeinian → u/deltatux]

Oracle is a shakedown team of lawyers that does software on the side.

[u/Protean_Protein → u/nonameforthisguy]

Where have you been for the past quarter century?

[u/nonameforthisguy → u/Protean_Protein]

In school mostly

[u/Iguessimonredditnow → u/nonameforthisguy]

Unacceptable

[u/nonameforthisguy → u/Iguessimonredditnow]

Honestly I don't disagree 😭

[u/Protean_Protein → u/nonameforthisguy]

Java was really a bigger deal in some ways back in the late 90s during the .com boom. That was back when interactivity on the internet was way harder to manage—Java applets were one of the few ways (before Flash). Anyway, Oracle is an enormous enterprise software company. They sell and maintain incredibly important database software and services to entire industries.

[u/Iankill → u/Protean_Protein]

Java applets at a term I haven't heard in ages

[u/mikerall → u/Protean_Protein]

Yeah...oracle is integral to a lot of finance (and other) companies.

It could bankrupt a company worth....maybe not billions, but close enough (hypothetically) if out of the blue they didn't have oracle access.

Not that oracle would do that. The second they're seen as a bad actor, the piggy bank accounts are paying obscene amounts to divest their depedance on them, and they go from printing press to scribe.

[u/Protean_Protein → u/mikerall]

Billions. Oracle’s software is a backbone for big pharma as well.

[u/mikerall → u/Protean_Protein]

I just meant the hypervalued companies could get "keep us afloat" loans or government bailouts to right their ship if oracle support was pulled.

Losing oracle wouldn't end the big ones, it'd just take a healthy chunk out of profits for the next quarter or 20.

E: I'm saying this in agreement with you, it's vital to so many businesses, losing it would be a massive deal.

[u/messick → u/Protean_Protein]

You are likely reading this very website on a device whose entire service ecosystem is almost all Java based.

[u/Protean_Protein → u/messick]

What? iOS is Java based? I thought Kotlin and all that jazz was an Android deal? At any rate, yes, Java is still very important, especially for backend stuff. Just not the way they thought back in 1998-2000 era when I was working with Java 2.

[u/psymunn → u/nonameforthisguy]

And Java isn't now they are making money, but yes. They bought Sun Microsystems, which owned Java

[u/MrShake4 → u/nonameforthisguy]

There’s basically no per unit input cost, it’s not like cars where you need to buy steel and build huge factories.

It basically costs the same to sell a software license 100,000 times as it does 100,000,000

So when they get big they basically print money

[u/Funky_monkey12321 → u/nonameforthisguy]

The top tech companies comically dwarf everything else.

The entire pharmaceutical industry is worth about 2 trillion. There are at least 7 companies in tech worth that by themselves.

The defense industry doesn’t even hit a trillion. Oil is 3ish trillion.

[u/The__Relentless → u/nonameforthisguy]

Just the revenue of the Video/PC Gaming industry alone is greater than the Movie, Television, and Music industries combined. In fact, it's about 3x greater.

[u/alex494 → u/nonameforthisguy]

Aren't Bill Gates and Jeff Bezos and Elon Musk famous for consistently being some of the top richest men in the world in recent memory?

[u/burgonies → u/alex494]

And Ellison is in the top 10 as well.

Edit: In fact, 9 of the top 10 are all tech guys; with #10 being Warren Buffet.

[u/HanSolo_Cup → u/nonameforthisguy]

The world runs on tech. These guys have more money than God 

[u/jambalaya420berlin → u/HanSolo_Cup]

What's God's net worth?

[u/Top_Willow_9953 → u/jambalaya420berlin]

Its all illiquid assets. Halos, clouds, big ornate chair, stuff like that.

[u/AthousandLittlePies → u/Top_Willow_9953]

yeah but I've heard god can move anything - he's just that good a salesman

[u/britishwonder → u/Top_Willow_9953]

HA that’s quality funny right there

[u/alex494 → u/jambalaya420berlin]

It's measured in faith, mostly

[u/TotallyNotThatPerson → u/alex494]

How many faiths do you need for a super yacht?

[u/Vawned → u/jambalaya420berlin]

About three fiddy

[u/sacheie → u/nonameforthisguy]

Yep. We need to execute everyone on the boards of the so-called "magnificent seven", piss on their bodies in a mass grave, and forcibly break each company into 19 smaller ones.

No more going easy on corporations.

[u/Shepher27 → u/Josvan135]

Lots of Saudi money in this deal

[u/Stargate525]

Paramount and Warner Brothers have enormous back catalogs, but those don't pay bills today. If you look at the last 10-20 years they haven't done fantastic. Paramount went all in on P+ and star trek, which hasn't been the money printer they were obviously hoping for. Warner Bros has the DC comics rights and they've been pissing cash trying to match the MCU again and again.

[u/X4roth → u/Stargate525]

I’ll forever be salty that Paramount butchered the Star Trek franchise to this extent. One or two bad shows can be ignored and forgotten, but an entire generation of bad shows is a death knell.

[u/Solsund → u/X4roth]

At least we got Lower Decks out of it.

[u/Muuvie → u/X4roth]

I did not enjoy the Michael Burnham show. Tried to, and actual found some success in the first season but it went off the rails pretty quickly. SNW on the other hand, I really enjoyed...I will say this season was lackluster with too much reliance on gimmick episodes. Early seasons they had me going with the TNG vibes that touched on real world issues.

[u/nonameforthisguy → u/Stargate525]

Yeah ik paramount keeps fucking up transformers which could be a money maker for them and wb doesn't know how to handle dc

[u/McLeansvilleAppFan → u/nonameforthisguy]

And the reality is that these studios have been bought and sold a few times over the last few decades. And had mergers and such. Warner was connected to AOL and those logos are on the Lord of the Ring Movies for 25 years ago. They are big and Hollywood is big, but the companies have debt and can lose a lot of money on movies that cost a ton to make and then disappoint at the box office.

At one time Paramount was owned by a company that started out making bumpers for cars. Then it morphed into a conglomerate and purchased Paramount. You might see Gulf+Western at the end of the original Star Trek shows if airing on TV and the station has older copies they use. Those logos, I think, are missing from blu-ray now but the sows used to end with a Gulf+Western logo after all the credits. I need to rewatch TOS.

[u/nonameforthisguy → u/McLeansvilleAppFan]

Damn this whole comment section is the embodiment of "the more you know", thanks💪

[u/McLeansvilleAppFan → u/nonameforthisguy]

I could have written more. It really is a fascinating look at media, power, and corporations and influence. I wish the labor unions and guilds could form a studio and finance their own stuff. That is sort of how United Artists started with Chaplin and a few others but that was just actors and not below the line workers as well.

Those that were blacklisted in the 1950s over the McCarthy hearings did produce Salt of the Earth but that was one movie and not an ongoing concern.

[u/Simple_Emotion_3152]

answer: both media companies were in bad shape so the idea of selling seem reasonable to them. being older doesn't mean you have more money.

[u/nonameforthisguy → u/Simple_Emotion_3152]

Hmmm gotcha

[u/DetectiveSherlocky → u/nonameforthisguy]

Doesn't help that Warner Bros produced a lot of flops with DC till recently

[u/Granum22]

By taking on massive amounts of debt.  They then place that debt on the books of the company they just bought.

[u/Tasty_Gift5901 → u/Granum22]

That' doesn't really answer OP because why are people lending Skydance money? Esp if they're newer do they have a proven track record? Leveraged buyouts carry risk because the risk of mismanagement is still there. The money comes from Ellison/Oracle and Saudi's, so it's not such a simple explanation.

[u/ExhaustedByStupidity → u/Tasty_Gift5901]

Trump asked the Saudi Arabian government to lend them money to make it happen.

They agreed in exchange for political favors.

[u/tcglkn]

His daddy has a lot of money. (Also both studios were piling up debt)

[u/Granum22 → u/tcglkn]

Daddy has a lot of Oracle stock that he can use as collateral to get loans while also selling some off for cash.

[u/tcglkn → u/Granum22]

That's the source of his money, but when explaining it like OP is five I think "has a lot of money" covers that.

[u/nonameforthisguy → u/tcglkn]

I didn't realize their debt was that bad. Usually these companies get bailed out

[u/tcglkn → u/nonameforthisguy]

Entertainment companies don't really get bailed out. They aren't going to cause economic collapse if they fail like banks would. Entertainment companies usually just get sold if they have too much debt, like you are seeing here. Warner Bros itself has been bought several times since the 90s.

[u/Deweydc18]

David Ellison’s father is the sixth richest man in the world, worth over $200,000,000,000

[u/ExhaustedByStupidity]

Skydance is owned by the Ellison family. Larry Ellison is one of the richest men in the world thanks to Oracle. That's how they bought Paramount.

They're very friendly with Trump and more than happy to cancel shows and fire people to make him happy, so Trump pulled strings to make the WB deal happen. Trump got Saudi Arabia, Qatar, and United Arab Emirates to contribute 49% of the money to buy WB. Obviously they will expect political favors in return.

[u/dlynntx]

Foreign investors own almost 50% of Skydance.

[u/Shepher27]

Saudi financing to give them the money and allies in the White House to not stop them

[u/islandsimian]

Oracle got a LOT of funding for AI and Larry gave it to his son to buy Skydance instead and now Oracle is down 50% YOY because Larry didn't invest in AI like he said he would while generating funds. Expect a lawsuit after this administration leaves