Elon Musk will put up to $10 billion into Skydance to help the media giant pay down debt while also giving SpaceX satellite subsidiary Starlink a foothold in the entertainment business.
That was the eye-opening prediction offered Wednesday by John Malone, the billionaire media mogul who has earned a reputation as a sage for his ability to anticipate the future. Musk had already been reported to be a potential investor in Skydance, but Malone highlighted his corporate portfolio as well as the relationship with Skydance backer Larry Ellison, father of CEO David Ellison.
“These guys are very intertwined,” Malone said in a conversation with Liberty Global CEO Mike Fries at the Paley Center for Media’s International Council Summit. “Who helped Elon finance Twitter when he bought it [for $44 billion in 2022]? Larry Ellison. Okay. How did Larry Ellison come up with some of the money to put into the creation of Skydance? Tesla stock. And I would not doubt for a minute that before very long you’re gonna see an announcement. I predict – big prediction – that you’ll see a global output deal for Skydance with SpaceX, and an investment by SpaceX into Skydance, to de-lever Skydance and take a little bit of the burden off [Skydance CEO] David Ellison’s shoulders, because he’s taking on a pretty big pile of debt.”
The $110 billion merger of Paramount and Warner Bros. Discovery, which created Skydance, closed earlier this month. The new company has nearly $80 billion in debt, with leverage of six-and-a-half times trailing earnings, a ratio that has alarmed investors and triggered credit rating downgrades.
“I think there’s a deal coming there,” Malone repeated of Ellison and Musk. “Maybe an $8 billion or $10 billion cross-investment.”
Starlink has disrupted legacy broadband and telecom players, though the company is never far from controversy. Aside from technical limitations across Europe (Liberty Global’s home turf), Fries said the recent decision by Musk to compromise Starlink service in the Ukraine, making it vulnerable to military attacks by Russia, will not help the company’s efforts to reach global scale.
Malone, a cable television pioneer who went on to build a diversified media portfolio, was a major stakeholder in WBD. Fries congratulated him on the deal’s close, which came after 11th hour legal drama, and asked what Malone would be advising David Ellison and his management team as they take the controls.
“He has an eroding linear business,” Malone said. “It’s a huge, but shrinking, business. He’s gonna have to re-engineer all of those channels, and figure out how they morph into streams themselves rather than just traditional linear.”
Larry Ellison, who went on a “borrowing spree” in order to finance the merger, according to the Wall Street Journal, “is going to have to figure out a way to combine a social network with content with streaming, in order to try and keep pace with YouTube and Google and AI. I think, in Larry’s mind, you know, Larry was looking at a whole different business, and in all honesty then just chasing after Netflix.”
Fries also asked about Netflix’s decision to bow out of the chase for Warner Bros. after initially clinching a deal to buy the studio and streaming operations. The effort, which didn’t bear fruit, has been a big drag on Netflix’s stock of late.
“They were right on the verge of pressing on, and were told by the administration that they had no chance of getting regulatory approval from the U.S.,” Malone said, without elaborating. “I think that that was really the spike that got him.”