Warner Bros. Discovery and Paramount execs explore possible merger

A new union is looming in Hollywood. Two giant studios, Warner Bros. Discovery and Paramount, are in talks about a possible merger, with the move potentially giving new impetus to the streaming wars.

As first revealed by Axios, Warner Bros. Discovery’s CEO David Zaslav and Bob Bakish, the head of Paramount, met on Tuesday in New York to discuss the details of a possible merger. The meeting took place at Paramount’s headquarters in Times Square.

This would not be a merger of equals. The market value of Warner Bros. Discovery (WBD) was around $29 billion this week, while Paramount’s was just over $10 billion.

Still, the combination would surely create a news and entertainment behemoth that would also likely trigger further industry consolidation.

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 most respected television networks in the United States.

Paramount boasts an impressive film catalog, owning rights to movies such as The Godfather, Terminator, and Top Gun. The company also has valuable small screen titles like Yellowstone. WBD, of course, comes with its extensive HBO library and shows such as Game of Thrones or The Last of Us.

It's unclear whether WBD would buy Paramount Global or its parent company, National Amusements Inc. (NAI), Axios said. Both options are allegedly on the table, and WBD is said to have hired bankers to explore the deal.

Paramount seems to be under pressure to find a strategic partner or buyer, as it's staring down a mountain of debt – over $15 billion. However, WBD has around $43 billion in debt and only has a BBB credit rating.

That’s probably why Wall Street analysts told Reuters they thought WBD and Paramount were likely to be "worse off" together, as a merger will leave them billions deeper in debt and saddled with dying traditional television assets.

Consolidation in the industry is inevitable, though, according to AlixPartners, a management consulting company. The market currently has over 80 global streaming players. Four to five players are expected to prevail in a “winner-takes-most” scenario, but it will allegedly take time.

Paramount is reportedly already looking at options to make its streaming service more profitable and attractive. The Wall Street Journal recently reported that Paramount+ and Apple TV+ could soon be offered as a bundle to subscribers at a discount.