Report: Warner Bros. Discovery, Paramount in Early Merger Talks

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Facts

  • Warner Bros. Discovery and Paramount are reportedly in talks over a potential merger. According to Axios, CEOs David Zaslav of Warner and Bob Bakish of Paramount discussed merging the combined $38B market value of their companies during lunch in New York this week.1
  • Zaslav reportedly also spoke with Shari Redstone, the head of Paramount's parent company, National Amusements, but it's unknown whether Warner would buy either if a merger took place. The two CEOs are believed to have discussed how they could work together to compete with industry giants like Netflix and Disney+.2
  • Alongside its self-named studio, Warner Bros. also owns the cable networks CNN, TNT, and HBO, as well as its streaming service, Max, which contains much of the aforementioned content. Paramount also owns cable channels, such as MTV, Nickelodeon, and Comedy Central, as well as the CBS broadcast network and its own Paramount+ streaming platform.3
  • While Warner is bogged down by over $40B, a successful merger could help the combined companies when negotiating with cable distributors like Comcast and Charter. It could also help cut costs with respect to marketing the companies' movies and shows.4
  • As Netflix has cracked down on shared accounts, the streaming giant has boosted its total global subscribers to 247.2M, compared to Paramount+'s 63.4M and Discovery's 95M as of November. Discovery merged with AT&T's Warner Media last year to become Warner Bros. Discovery.1
  • This also comes as the Biden administration has intensified its scrutiny of mergers and acquisitions. Combining two of the largest movie studios and streaming platforms will likely be on the radar of government anti-trust watchdogs.3

Sources: 1BBC News, 2Verge, 3Wall Street Journal and 4New York Times.

Narratives

  • Narrative A, as provided by The hollywood reporter. The entertainment industry is unashamedly pursuing merger after merger, even despite the recent Hollywood writers' strike and the Biden administration's legal battles. As the government fails to block both horizontal and vertical mergers, the industry has become more emboldened to narrow the TV and movie playing field. After the strike, everyone predicted such moves would occur — Warner Bros. and Paramount are proving that true.
  • Narrative B, as provided by New york times. From a consumer and anti-trust standpoint, this merger may actually be a good thing. While the government will certainly be watching these talks play out, it's important to note that Netflix and Disney+ are both much bigger than Paramount+ and Max — if they were to merge, there would be a more suitable competitor thrown into the mix. The combined debt of Warner Bros. and Paramount would also be an issue, but more subscriptions from their respective sports streaming assets could also bring in more cash.