A Warner Bros. Paramount merger is in the works according to CNBC and other sources, and this union could be groundbreaking in the world of streaming. While no moves have been made to initiate the process of joining the two entertainment giants, the Paramount Global merger talks with Warner Bros. reportedly took place over a lunch meeting on Tuesday, between Warner Bros. Discovery CEO David Zaslav and Paramount Global CEO Bob Bakish. Considering the Warner Bro. Discovery’s market value was around $29 billion and Paramount Global stood at $10 million, Axios states that any merger between the two companies would stand on uneven grounds and additional compromises would have to be made to strike a fair deal between them. We’re short on the Warner Bros Paramount deal details but if the companies decide to go through with it, the competition would have to start taking their market presence a lot more seriously.
Is a Warner Bros. Discovery and Paramount Global Merger in the Works?
Warner Bros. Discovery is a brand name that wears many caps from Warner Bros. Entertainment ventures to an unrivalled array of cable networks and brands that have gained popularity in their own right. However, considering the fact that their audience is mainly migrating to streaming services and OTT platforms, and leaving cable far behind, there is pressure on the company to do more and keep up with competitors. The smaller but just as active Paramount Global has its own collection of channels like CBS, Paramount Pictures, MTV, Comedy Central, etc.
As such, a Warner Bros. Paramount merger could result in a pooled share of resources that could be expanded and adapted to challenge every entertainment service available right now but it would be a risky game with a clear game plan. Paramount Global reported long-term debt of $15.5 billion while Warner Bros. Discovery reportedly has a $43.5 billion debt load. Considering that WBD has better market capitalization numbers, the company is currently better placed to lead the merger, which is where the company has been investing the most recently.
Last year, the WarnerMedia and Discovery merger was the talk of the town and the deal was supposed to have revived the legacy of the two groups by making their streaming services as profitable as their old TV business but despite some successes, like the brief domination of the Barbie movie over the film industry, things largely have not turned around for the company yet, which makes Paramount Global’s merger talks with Warner Bros a little confusing considering profitability might suffer on both sides.
Warner Bros-Paramount Deal Details
The Warner Bros. Discovery-Paramount Global merger is only in its early stages of discussion and there are no clear indications of how the two companies could be consolidated. All things considered, the Warner Bros, Paramount deal details could include a full buyout of the parent company National Amusement Inc. or just the businesses that fall under Paramount Global but it would be a hefty investment and responsibility for WBD to go either way. Analysts talking to Deadline have questioned the rationality of the decision, wondering how the adoption of another debt-ridden company could help with the extensive debt that they already hold themselves.
Some speculate that the Paramount Global merger talks with Warner Bros could lead to Warner Bros. taking on some of the big titles that Paramount will bring with it and cutting down the rest of its services to build back the money being lost on other programs, and while that could potentially be beneficial in the long term, it would take a long time to fully turn productive.
If successful, the merger could see Warner Bros. Discovery gain ground on multiple fronts. The news platforms CBS News and CNN could potentially be merged or could cater to slightly different audiences if they want to retain both platforms. The biggest gain would be in combining the success of both film studios. Paramount franchises like Star Trek, Indiana Jones, Mission Impossible, Transformers, etc. could be revitalized in this era of aggressively pursuing sequels, but those have also lost some of the power they used to hold back in the day.
Reuters reported that according to Wall Street analysts, the two companies would be worse off together and the market shares dropping following news of the merger talks indicates that the market might think the same. Making the deal during a time when the country has its presidential elections coming up might further the risk the companies face, considering the regulatory uncertainties of finding approval for such a big deal.
“It (the potential deal) looks like a play for survival at all costs. Both businesses are heavily indebted and it is likely further debt will need to be issued to make this deal possible.”
—Quilter Cheviot technology analyst Ben Barringer, Reuters
Is a Warner Bros. Paramount Merger the Only Potential Deal?
After Warner Bros.’s last merger, the company was constricted to a two-year wait period that will expire in April following which it should be free to strike another deal, which is likely when this might be moved further. CNBC has argued that a deal with Comcast may be a more favorable alternative for the company if Comcast is open to it, without having to take on the debt that would come with Paramount Global.
For Paramount, however, it seems that striking a deal is an immediate concern as Skydance Media also appears to have expressed interest in buying a majority stake in parent company NAI. Redstone, the majority stakeholder in Paramount, has reportedly been in discussions with Skydance Media CEO David Ellison and departing Activision Blizzard CEO Bobby Kotick about a possible share sale but there are no updates on the conversation just yet. A Warner Bros. Paramount merger might also see WBD sell the Paramount movie studio to Skydance and divest some of the burden that way according to Deadline, but these are all hypothetical scenarios for now.
The main aim of the Warner Bros. Paramount merger is likely to target streaming services, Netflix is the biggest, most unshakeable contender, but there is no evidence that a merger would better equip the companies to confront competition. The Max and Paramount+ premium streaming services could be combined to facilitate this but the titles both own may not really be enough to truly make a dent in Netflix or Prime’s market value.
While Max still falls within the top 5 streaming platforms, it seems that the actual gap in value prevents Max from growing any further or truly challenging its top two competitors. Warner Bros. Discovery could essentially choose to break down all of the Paramount Global services and sell them to interested candidates, but is there a market willing to buy the various segments? Currently, that seems unlikely.
