Happy Labor Day, and welcome back to Dry Powder, arriving a little later this week on account of the holiday.

For today’s email, I debated my Puck partner Matt Belloni about the wisdom of Netflix’s new ad-supported tier, Dan Loeb’s plans for Disney, and whether John Stankey got the better of David Zaslav. Plus a few observations on the defenestration of Brian Stelter at CNN and whatever M&A strategery Brian Roberts has got cooking.

But first, a few thoughts on Illumina beating the Biden administration’s antitrust case against its $7.1 billion acquisition of the cancer-detection startup Grail…

But while Illumina may have won this round with the Biden administration, there are potentially more rounds to go. The F.T.C. staff could still appeal the administrative judge’s ruling to the full commission, potentially sending the case up to a federal appeals court. And then there is the regulatory drama still unfolding in Europe, where an E.U. court recently ruled that its competition regulator also has jurisdiction over the Illumina-Grail merger, even though Grail does no business in the E.U. countries and has no plans to do so for at least another 10 years. Illumina said it plans to appeal the E.U. court decision.

In the meantime, Illumina has kept Grail separate from the rest of the company and will presumably divest it again at some point if forced to do so, probably for considerably more than what it paid for it. The technology, after all, really is quite miraculous—a $950 test that uses Illumina's genetic sequencing to uncover early-stage cancers long before symptoms may even appear. “The potential for this to save lives is so enormous that we felt we have a moral obligation to make sure we did everything we could to make sure this deal got a full and fair review,” deSouza told me a year ago. “Ultimately, of course, we will abide by whatever the outcome is, but we didn’t want to feel like there was something we could have done that we didn’t do. We have a moral obligation, we feel, to at least have this deal heard.”

That’s all fine and good, Francis, and I applaud your moral stance. But what about that stock price decline? Since my last interview with deSouza, Illumina’s stock has fallen by more than half, 58 percent to be precise. Where a year ago, Illumina was a company with a market value of $70 billion, its market value is now around $31 billion. That might put him in the crosshairs before the Grail matter is resolved.

William D. Cohan: Wall Street sees the ad-supported layer as a revenue opportunity for both companies, for sure. How much remains to be seen, though the reported $65 per 1,000 views that Netflix is asking for ads is indeed aggressive. The question is whether saving around $7 a month is worth getting bombarded with ads for plaque psoriasis and Skyrizi. Streaming is one of the few places where you can avoid mind-numbing ads. You can’t even do that in the movie theater anymore, to the extent that anyone goes to movie theaters anymore.

Belloni: I hear you on the annoyance, but I totally disagree. Consumers are going to love the ad tier. Not for the ads, but for the lower price point. Wells Fargo analyst Steven Cahall estimated in June that 30 percent of Netflix customers will choose the ads by 2025, and that Netflix’s overall subscriber count will jump to 272 million (and growing) from 220 million (and shrinking) today. He also thinks revenue per subscriber will increase 3 percent to $14.20 worldwide. That’s exactly the scale and revenue growth investors are demanding.

Cohan: I don’t want to sound like a privileged elitist here, but to avoid ads for a year for roughly $85 sounds like the bargain of the century. And I think Cahall is smoking something if he thinks Netflix’s subscribers are going to increase by 52 million, or 24 percent, just because they can save a few bucks. Now if the trade-off were between free, as in rabbit ears on linear TV, and $15 a month, that might result in a boost in subscribers. But I don’t think the ad tier is the Holy Grail these companies think it will be. My take is that introducing ads will cost Disney and Netflix more in the long run in terms of prestige and consumer annoyance. It’s not too late to change your minds, Bob and Reed!

Belloni: Disney’s share price is down about 10 percent since Dan Loeb began his latest campaign for changes last month. I don’t see Chapek selling ESPN, though you’ve written he might listen to Loeb and either trim costs, or buy back Hulu from Comcast sooner rather than later. How long will this Loeb drama play out?

Cohan: There’s no reason for Disney not to get control of Hulu as soon as it can, so I think that will probably happen on the accelerated timetable that Loeb would like. So get that done, Bob. As for ESPN, I don’t think Dan is wedded to the spin-off idea. I think he’s wedded to ways to reduce Disney’s $37 billion of net debt, and one idea he has is spinning off ESPN, loading it up with some of that $37 billion, and floating it away. Dan seems quite fixated on paying down the debt, which normally I’d be all for doing. But $37 billion isn’t too much debt for a company like Disney, where the EBITDA fortunes are on the rebound after the pandemic closures. On the other hand, Dan is a billionaire and I am not, so he probably knows more about paying down debt than I do.

Belloni: The slow-moving layoffs and cost-cutting shrinkage at Warner Bros. Discovery will also likely dominate the headlines for the next few months. People often ask me how I think the new C.E.O. David Zaslav is doing, and I feel like that depends on who you talk to. To Hollywood people, his moves, like scrapping the Batgirl film and ending scripted programs on the Turner networks, have turned him into a corporate villain of sorts. But to the New York finance crowd, he’s doing exactly what he promised investors—and what needs to be done to save this company from its $50-something billion in debt. Where do you stand?

Cohan: I love the guy, so I am trying hard to be objective here. He’s got around $52 billion of debt and at best $12 billion of EBITDA coming in 2023. That number was projected at $14 billion before the recent re-forecast, so that’s not good for David or for Wall Street. The stock is down 48 percent in the past six months, so that’s also not good. On the other hand, he’s certainly showing Wall Street that there are few, if any, sacred cows, and he’s willing to do whatever it takes to get the house in order financially while not diminishing terribly the quality of the product. I hated to see my friend Andrew Morse get zotzed along with CNN+, but that decision was hardly a surprise. It was a surprise to see another friend, Brian Stelter, get defenestrated. Still not sure I understand that.

Belloni: Me neither. Regardless of what John Malone thought of it, Brian’s show was small-potatoes for CNN, and I’m betting if its leader Chris Licht had told him to quit it with the Fox News diatribes, Brian would have re-positioned himself. The White House correspondent John Harwood announced his exit on Friday, hours after he called Donald Trump a “dishonest demagogue,” so the CNN purge is only beginning.

Cohan: It’s certainly not business as usual at the old WarnerMedia, and that’s probably for the best. TimeWarner has been a bloated whale for decades now, so if Zaz can finally whip it into shape, then hallelujah. I still worry about the debt. Unlike Disney, for WBD, $53 billion is a big number, especially so if that $12 billion in 2023 EBITDA slips again. I’m afraid it’s increasingly looking like AT&T’s John Stankey might have gotten the better of Zaz by sticking him with all that debt.

Belloni: Speaking of debt, Cineworld, the second largest movie theater company, has been teetering on the brink of bankruptcy, which would be a fitting symbol of an extremely challenged theater industry. A smart investor texted me that these theater companies are “uninvestable” right now. How will this slow-moving car crash play out?

Cohan: Through more and more bankruptcies, alas. (With the apparent exception of AMC, which benefits from being a meme stock and can pull off financing moves that others can only dream about.) Back in the day, I helped Norman Lear buy his movie theater business, known as Act III Communications. It was a great business, huge margins—50 percent on the films; 80 percent on the popcorn—and Lear made a lot of money buying and selling the theaters. But as we both know, the pandemic changed that dynamic dramatically and the days of total domestic box-office revenue of $10 billion or $11 billion are a thing of the past.

Belloni: Did you see Top Gun: Maverick in the theater?

Cohan: I didn’t, but I can’t wait to stream it on my picture-perfect TV screen. Your friend is right. The movie theater industry is uninvestable right now. (This is not investment advice.) I wouldn’t go near it with a ten-foot pole, and that’s taking into account that it’s always interesting to think about investing in an industry when no one else is. This is one where people aren’t investing for good reason.

Belloni: Comcast C.E.O. Brian Roberts has been pretty quiet this summer. That usually means something’s cooking. Besides $1 billion in cost cuts at his TV networks, which Bloomberg says are coming, what would you guess it is?

Cohan: My money is still on the combination of NBCUniversal with WBD. It just makes too much sense for the two moguls, Roberts and Zaz, not to be thinking through it. In fact, it’s borderline irresponsible if they don’t kick the tires on this deal. Aside from that, I’m not sure what else Comcast can do. Paramount Global is probably out because of the NBC-CBS overlap. I suppose some sort of gaming deal could be in the offing, perhaps in the realm of Electronic Arts, market value of $35 billion, or TakeTwo Interactive, market value of $20 billion. But I’m not sure I see Comcast getting into this kind of content. His better bet, it seems to me, is Comcast owning 51 percent of the combined NBCU/WBD, with Zaz running it. That feels like a winner, and will allow WBD to spread out its debt over more EBITDA and confuse the stock analysts for another couple of years while everything gets figured out.

Belloni: But they can’t actually do that deal for a few years, right? The reverse Morris Trust rules that came with the WBD spinoff have set a ticking clock, of sorts, on consummating another transaction.

Cohan: April 2024, but given how long it takes these kinds of deals to close, there’s no time like the present to begin. They don’t need to wait until Allen & Co.’s conference next year in Sun Valley to chit chat about this.

Belloni: Speaking of NBC’s owner, your big book on the rise and fall of General Electric, Power Failure, is coming out this fall (Nov. 15). Congrats. Tell me something I don’t know about GE’s tumultuous ownership of NBC Universal.

Cohan: That GE decided to sell NBCU to Comcast in 2009 as a desperate measure to raise cash to try to keep GE Capital, and by extension GE itself, out of bankruptcy. It was that bad. The decision came pretty much on the same day that GE’s stock hit a low of $6.66 in March 2009, and Keith Sherin, GE’s C.F.O., went on CNBC to try to calm investors down about how bad things were at GE. Brian Roberts had been after Jeff Immelt for years to sell NBCU to Comcast, ever since Comcast lost out to GE on buying Universal’s assets from Vivendi. Brian kept after Immelt—playing golf, having dinners—and ended up being able to buy NBCU without having to endure an auction and, for a price, around $30 billion, that turned out to be quite the steal.

Belloni: Zaslav was there at NBCU as a cable TV executive when the Comcast acquisition happened, right? Very ironic that he could ultimately run those assets if combined with WBD.

Cohan: Zaz was at GE/NBC for the birth of both CNBC and MSNBC, so it would be a very fitting denouement for NBCU to end in his purview, if not total control. And by the way, since Zaz had to go to Malone to get the OK for CNBC initially, it would also be ironic that Malone, in his 80s, would once again be a behind-the-scenes power at NBCU, as apparently he is already at CNN, according to our colleague Dylan Byers. Brian’s got to do something here and so does Zaz. A match made in heaven.