Consolidation is once again stirring America’s restless media industry. Paramount Skydance, the newly merged group that combines Paramount Global with Skydance Media, is preparing a bid for Warner Bros Discovery NASDAQ:WBD, according to reports in both the Wall Street Journal and Reuters.
The offer, backed by the deep pockets of Larry Ellison, the software billionaire, and his son David Ellison, Paramount Skydance’s boss, would be mostly in cash. No formal approach has yet been made, but the prospect has already jolted Wall Street.
Shares in Warner Bros Discovery leapt by more than a third after the news emerged on Thursday, reflecting investors’ enthusiasm for a possible exit from what has been a miserable stock. Paramount Skydance’s own shares also rose, though more modestly, suggesting a degree of caution about the costs, execution and regulatory hurdles of a megadeal.
Deal would create a media mammoth
If consummated, the transaction would be among the most ambitious in recent memory. WBD’s empire includes Warner Bros’ storied film and television studio, HBO and its streaming offspring, CNN, and a grab-bag of global cable networks. Paramount Skydance brings CBS, Paramount Pictures, Paramount+ and assorted legacy channels, as well as new franchises from Skydance itself.
The combined entity would boast one of the world’s largest content libraries and formidable reach across streaming, linear television and cinema.
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The strategic logic is clear. Streaming competition is brutal. Netflix and Disney dominate in scale, while Amazon and Apple subsidise their offerings with the spoils of cloud computing and hardware. For smaller players, bulking up may be the only way to stay relevant.
A merger would also unite valuable sports rights: Warner’s portfolio includes NBA, MLB and March Madness basketball, while Paramount Skydance has recently secured UFC bouts. Sports, unlike scripted drama, still attract mass live audiences and advertisers.
What are the risks of this deal?
The risks are legion. WBD’s balance sheet is weighed down with debt, a legacy of its 2022 merger with Discovery. Absorbing those liabilities would require Paramount Skydance to raise eye-watering sums of capital. Even with Ellison family backing, the financing would be arduous.
Regulators would also take a hard look. Combining two of America’s largest content owners, with overlapping studios, networks and newsrooms, could trigger scrutiny in Washington and beyond. Politicians already fret about the power of “Big Tech” in streaming; they may be equally wary of an old-media behemoth wielding too much sway over culture, news and sport.
And then comes the practical matter of integration. History is littered with disastrous media marriages — think of AOL and Time Warner, or indeed the more recent Warner-Discovery combination, still struggling to extract promised synergies. Melding corporate cultures, rationalising overlapping divisions, and keeping creative talent on board while cutting costs would test even the most patient management.
Is this a media mega deal too far?
The timing adds intrigue. WBD has been planning a corporate restructuring, separating its cable networks from its studio and streaming arm. That would give investors cleaner exposure to growth areas and might make parts of the business easier to sell. Paramount Skydance’s overture may be an attempt to pre-empt this process and buy the whole at once.
Whether it succeeds is another matter. Financing, regulation, shareholder approval and strategic fit all remain uncertain. Yet the fact that such a deal is being contemplated speaks volumes about the industry’s direction. In an age when attention is fragmented and profits elusive, scale is prized above all.
If Paramount Skydance does take the plunge, the outcome will shape the media landscape for years, either as a triumphant “super-studio” able to challenge Netflix and Disney, or as another cautionary tale of corporate overreach.
