A new marriage is brewing in Hollywood. This is not a wedding between celebrities, but rather two studios whose merger could change the entertainment industry in the coming years. The giant Warner Bros. Discovery is exploring a union with Paramount, as revealed by Axios. The digital media reported that the CEOs of both companies, David Zaslav and Bob Bakish, met on Tuesday in New York to discuss the details of a possible merger. If it goes ahead, the move would give new impetus to the streaming war, in which large companies are fighting to expand their catalogs in a bid to consolidate their digital platforms.
According to Bloomberg, the talks took place at Paramount’s offices in Times Square. The agreement between the parties is still at an early stage and the negotiations are preliminary. The efforts of Zaslav, the CEO of Warner Bros. Discovery, have included conversations with Shari Redstone, the president of Paramount and majority shareholder of the studio through the company National Amusements, which is valued at $10 billion. Her father, Sumner Redstone, who died in 2020, was one of the leading media moguls in the United States, having under his power Viacom and the TV networks CBS, MTV, Nickelodeon, Comedy Central, as well as the publishing house Simon & Shuster, until it was acquired by Penguin Random House three years ago.
The merger between the companies would create a new industry giant. The companies could join forces by merging their digital platforms, Max and Paramount+, which would be a serious competitor to the market leaders, Netflix and Disney+. In the news market, CNN, which has gone through a series of profound changes in recent years, would be reinforced with CBS, one of the most traditional and emblematic television networks in the United States.
Paramount, one of the most important studios in Hollywood, boasts a valuable film catalog. The Godfather, Terminator, Transformers, Mission: Impossible and Top Gun are some of the company’s biggest drawcards at a time when franchises and intellectual property are enormous assets for companies. The company also has valuable small screen titles, such as Yellowstone, the rural drama that has become a sensation in the United States; the NFL Sunday show; and children’s hits such as Paw Patrol and Dora the Explorer.
Warner, which has a market valuation of around $39 billion, and Paramount have already hired banks to analyze the financial projections to close the operation. If given the green light, the merger will require a lengthy review process by U.S. antitrust regulators. Zaslav’s company knows this well: it had to wait 11 months for authorities to approve its merger with Discovery. The deal was announced in the summer of 2021, but not finalized until May last year. That agreement produced two years of tax benefits to the new entertainment giant. These will come to an end in April 2024, allowing Warner Discovery to make new acquisitions. According to Axios, the merger between Warner Bros. Discovery and Paramount may be simpler, since Warner does not own a broadcast television network (Paramount does). This would have made getting the green light from the Federal Communications Commission (FCC) more difficult.
Analysts, however, believe that the biggest obstacle to the new merger is the large debt of both companies. Warner Bros. Discovery has around $43 billion in debt, an amount that grew significantly after last year’s merger. The company recently reduced it after paying off $12 billion, but it still has a BBB credit rating. Paramount, on the other hand, has $15 billion in debt.