Paramount-WBD Merger, Hollywood Wonders If This Episode Is a step back

Despite recent rumors that something was in motion, the news that Paramount is considering a bid for the entirety of Warner Bros. Discovery has garnered attention from Wall Street to Hollywood, just weeks after concluding its acquisition of Skydance. As the industry and investors assess the prospective entertainment giant that may emerge, a persistent inquiry arises: Has this film been previously released? The current developments bear some remarkable similarities to Disney's $71.3 billion acquisition of the majority of 21st Century Fox in 2019. However, that transaction is generally considered a failure. Nevertheless, the Ellison family's substantial wealth and Oracle's technological expertise serve as a foundation for this novel scenario, which instills optimism for a more promising future for traditional media in a difficult context.

To begin with, Disney-Fox represented the merger of two legacy film studios. On the television side, it united a studio that was renowned for its ability to serve all audiences (20th Century Fox TV) and a studio that was dedicated to supplying its sister broadcast network (ABC Studios). That would be the case for Warner Bros. TV and CBS Studios, respectively.

Another echo, as stated by a seasoned executive who has conducted transactions with both organizations, in an interview with Deadline: "The true objective is to maintain control over a substantial quantity of intellectual property." The leverage is entirely altered when one has access to a variety of sources, including the NFL, Taylor Sheridan, Tom Cruise movies, HBO, and Harry Potter.

Similar to the Disney-Fox transaction, the potential Paramount-WBD merger also entails a single broadcast network (CBS versus ABC for Disney-Fox), which would facilitate the acquisition's FCC approval. Although there would be a substantial volume of general entertainment cable networks, the primary distinction between the current situation and 2019 is that CNN would be included in the package. It is difficult to anticipate the outcome of the regulatory process, given President Trump's lengthy and contentious relationship with the network (recall that his Department of Justice engaged in a confrontation with AT&T in 2018 over its acquisition of Time Warner, primarily as a result of CNN).

The presence of streaming operations is a distinguishing feature of traditional media organizations that has evolved since 2019. A Paramount-WBD merger could result in the most significant elimination of a direct-to-consumer outlet yet, in the pursuit of cost efficiencies, several years into the streaming conflicts. Paramount had already terminated Showtime's streaming service, and WBD terminated CNN+. In contrast to the general-entertainment vessels, those were merely skiffs.

According to Michael Morris, an analyst at Guggenheim Securities, Paramount+ has approximately 50 million domestic subscribers, while Warner Bros. has approximately 58 million subscribers in the United States across HBO and HBO Max. (Paramount's global streaming totals were 77.7 million and WBD's were 125.7 million as of the most recent quarter's conclusion.) Morris wrote in a note to clients that the combined business opportunity is contingent upon the extent of overlap (or lack thereof). "The highest incremental margin opportunity should be a bundled P+/HBO/WBD streaming product that currently reaches subscribers on only a single service."

"It is evident that these two distinct services would have to merge in order for this to be successful," stated a former Paramount executive, despite the fact that HBO Max and Paramount+ have somewhat distinct channels.

On the free, ad-supported end, there is also a "chocolate and peanut butter" combination, as one streaming dealmaker referred to it. Pluto TV, which has been a pioneer in the FAST business but has lagged in recent years, has been nurtured by Paramount. WBD has demonstrated an interest in leveraging its extensive library to promote FAST channels and AVOD license deals. One media veteran observes that the convergence of these two entities has the potential to significantly increase the value of the streaming sector, which is expanding as consumers struggle with increasing prices.

The integration of the two channels will be complex in terms of executive leadership and programming. Casey Bloys, the Chairman and CEO of HBO and HBO Max Content, has effectively led the cable network in a transformation into a streaming brand while maintaining its status as an Emmy juggernaut with shows such as The Last of Us, The White Lotus, and Succession for nearly a decade.

Paramount+ is overseen by Cindy Holland, the Chair of Direct-to-Consumer for Paramount, who was instrumental in the development of Netflix into a dominant force in the original scripted series industry.

Despite the fact that HBO Max and Paramount+ have somewhat distinct channels, a former Paramount executive stated, "It is evident that these two distinct services would have to merge in order for this to be successful."

Additionally, there is a "chocolate and peanut butter" combination on the free, ad-supported end, as one streaming dealmaker put it. Paramount has fostered Pluto TV, which has been a pioneer in the FAST industry but has experienced a decline in recent years. WBD has shown a keen interest in utilizing its extensive library to promote AVOD license agreements and FAST channels. According to a media industry veteran, the convergence of these two entities has the potential to substantially enhance the value of the streaming sector, which is expanding as consumers grapple with rising prices.

The integration of the two channels will be intricate in terms of executive leadership and programming. For nearly a decade, Casey Bloys, the Chairman and CEO of HBO and HBO Max Content, has successfully guided the cable network in its transition to a streaming brand while simultaneously preserving its status as an Emmy juggernaut with series such as The Last of Us, The White Lotus, and Succession.

Cindy Holland, the Chair of Direct-to-Consumer for Paramount, supervises Paramount+. Holland played a critical role in the transformation of Netflix into a dominant force in the original scripted series industry.

“How long are we going to be treading water again?” another WBD executive asked Deadline.

Of course, instability does not have to be the death knell for creativity. Less than five years after the Disney-Fox merger, FX smashed Emmy records with shows like Shōgun and The Bear.

A merger of the Burbank studio behind Harry Potter, Dark Knight, The Conjuring, and Superman with the Melrose lot known for Mission: Impossible, Star Trek, A Quiet Place, and Transformers would challenge Disney's box office dominance. However, there are more questions than answers concerning Disney and its Marvel, Lucasfilm, and Pixar properties suddenly being on the back foot.

It would be beneficial for the new merger to retain Peter Safran and James Gunn as heads of DC Studios, especially since they have successfully revitalized the brand with the $614 million global grossing "Superman." The duo has developed a long-term, world-building strategy for DC across both movies and television series.

While DC remains a constant, several other factors come into play. Will the new merger preserve the Paramount, Warner Bros., and New Line brands in a manner similar to how Disney maintains its label alongside 20th Century Fox Studios and Searchlight? In 2024, Disney, with 20th Century Fox Studios and Searchlight, accounted for 30 theatrical releases (including titles carried over from the previous year) and captured 25% of the domestic box office share, totaling $2.2 billion and $5.45 billion worldwide.

If Paramount and Warner Bros. had merged last year, their combined total would not have been far behind Disney, with $2 billion domestically and $5 billion globally. If Paramount and Warner Bros. can maintain a similar output of features and market share as Disney, sources indicate that the conglomerate may be in a position to leverage stronger rental terms with exhibitors.

However, there are concerns that a merger between Paramount and Warner Bros. could result in fewer films being released compared to if they remained independent. A smaller slate of films could lead to fewer job opportunities in the movie industry. A source close to the studio operations suggests that the merger would cause “a complete transformation of the motion picture industry landscape and a ripple effect.”

As far as the executive suite, the new Paramount under motion picture bosses Josh Greenstein and Dana Goldberg has yet to find its new identity and make its mark. Early maneuvers include multi-picture deals for Will Smith and a first-look exclusive deal for Stranger Things creators The Duffer Brothers, as well as a big-screen version of Activision videogame Call of Duty going into development. They currently have a goal to increase theatrical output to 20 movies annually.

At WB, the Michael De Luca and Pam Abdy administration countered pessimism early this year amid reports that Zaslav was interviewing their potential successors, and the studio has shined at the box office with original fare such as Sinners and Weapons. It found its groove by distributing Apple Original Films’ F1 and launching a new franchise with A Minecraft Movie, which remains the second top-grossing MPA title of the year with $957.8M worldwide.

In addition to heading toward a profitable 2025, De Luca and Abdy have developed strong relationships with filmmakers such as Paul Thomas Anderson, Ryan Coogler, and Alejandro Iñarritu. Inarritu is developing Tom Cruise's next film, rumored to feature him as the world's most powerful man.

If a merger occurs in the future, Paramount could potentially absorb the Mission: Impossible star's current deal at Warner Bros. The financial resources of the Ellison family are always a consideration and have been highlighted in instances where Warner Bros. had to pass on a potential Cruise project due to its excessive budget.

The Ellison fortune plays a significant role on a larger scale, and Oracle’s recent success in AI has made Larry Ellison the world’s richest person. Bernstein Research analyst Laurent Yoon reflected on this in a recent note to clients.

“Could there be another bidder? We wouldn’t rule that out just yet,” he wrote. “However, the backing of the Ellison family—with a war chest that just got bigger by $100 billion … might make others hesitate. No one else may show up, but everyone’s thinking.”