Warner Bros. Discovery And Paramount Could Become One Company In Industry-Shaking Merger
After months of speculation related to two of Hollywood's biggest media companies, it seems that a huge, landscape-altering deal could be on the horizon. Warner Bros. Discovery is reportedly in talks to merge with Paramount, as reported by Axios. While it's cautioned that things are preliminary, WBD CEO David Zaslav did recently meet with Paramount CEO Bob Bakish to discuss a possible deal, which would potentially happen sometime next year. This would further alter the movie and TV business as we know it.
Zaslav is said to have spoken with Shari Redstone, who owns Paramount's parent company, National Amusements Inc., about a possible deal. This is also not the only talk we've heard lately regarding a possible takeover of Paramount, with Puck recently reporting that Skydance Media and RedBird Capital Partners were eyeing a potential deal to buy a majority stake in NAI. Talk of a potential sale of Paramount began last year but has heated up recently. The main reason being that Paramount, in all likelihood, will not be able to survive in the ever-evolving media landscape that is moving increasingly away from traditional TV and towards streaming.
Even though things are in the preliminary stages, WBD is said to have hired bankers to explore the possible deal. Looking at the numbers, Warner Bros. Discovery has a market cap of around $28 billion with a whopping $44 billion in debt. Paramount, meanwhile, has a market cap of just $10 billion with nearly $17 billion in debt. A tax provision that allowed Discovery to acquire WarnerMedia from AT&T last year expires next year. Once that happens, it opens the door for Zaslav to formally explore yet another massive deal. Such a deal would lead to yet another classic Hollywood studio going by the wayside and, undoubtedly, significant turmoil. When we talk about one multi-billion dollar behemoth acquiring another, it's always going to get a little messy.
Paramount can't survive alone
Should this deal go through, many people will be fired due to redundancies and restructuring. Various movies and TV shows will inevitably be canceled. There will be lots of shifting around at the corporate level. And crucially, creators will ultimately have fewer places to take a potential project for distribution.
So, why the possible merger? Why would Warner Bros. Discovery go through yet another major merger such as this just a couple of years after WB was upended following a tumultuous deal with AT&T that didn't pan out? It comes down to forming a larger company that stands a better shot at surviving against titans such as Disney and Netflix (and, to a lesser degree, Apple and Amazon, who are in the tech business but who basically offer movies and TV on the side). As it stands, WBD and Paramount are much smaller than any of those companies. But combined? They become almost too big to fail, even if the resulting merger would leave the new company with a tremendous debt load to service.
The two companies' streaming services, Paramount+ and Max, are a fraction of the size of Netflix. If the companies merge, they could merge those services into one huge offering. It would also put CBS News and CNN under the same roof, resulting in a potential news media empire. The DC Universe and the "Transformers" franchise would be in the same place. Execs are likely imagining what "Yellowstone" creator Taylor Sheridan could do at a place like HBO. It's not hard to see why this would be attractive to both parties.
For now, it's too early to say what the resulting company will look like, as this is all very early. That said, if it's not Warner Bros. Discovery, it feels very much like 2024 will be the year that someone makes a play for Paramount. But David Zaslav has officially thrown his hat in the ring.