Barely 5 weeks after sealing an $8 billion takeover of Paramount Global, David Ellison’s Skydance Media is reportedly weighing a a lot bigger prize – Warner Bros. Discovery (WBD). The potential $70 billion-plus deal comes whilst Paramount Skydance has but to complete chopping greater than 2,000 jobs to rein in prices. The timing raises a key query is why pursue one other acquisition earlier than the mud has settled on the Paramount merger?
Why strike a deal now?
On paper, it might sound logical for Ellison to attend till April 2026, when WBD is predicted to separate into two entities – Warner Bros. (HBO Max and studios) and Discovery Global (TV networks). Such a division would isolate the expansion engine, HBO Max and the studio portfolio, from the declining linear tv facet, making Warner Bros. a extra engaging goal.
Yet, specialists say shifting early could possibly be half of a bigger Ellison technique to consolidate media property in a unstable trade. Robert Fishman of MoffettNathanson argues that buying WBD as a complete now would stop rivals like Netflix, Amazon or Apple from cherry-selecting Warner Bros. publish-break up. Pre-emption, he says, could show extra beneficial than ready.
A Warner Bros. takeover would carry marquee property corresponding to Warner Bros. Motion Picture Group, HBO, DC Studios and NCS below Ellison’s management, propelling him into the highest tier of Hollywood energy brokers.
Competition for Warner Bros.
Wells Fargo’s Steven Cahall just lately described the longer term standalone Warner Bros. as “the only large IP asset for sale at a time when most streamers harbour expansion ambitions.” Netflix, although historically cautious of acquisitions, was recognized as probably the most compelling purchaser, with Amazon, Apple, Comcast and Sony additionally attainable contenders.
For Paramount Skydance, fusing HBO Max with Paramount+ may create a formidable streaming service. Beyond streaming, combining CBS with NCS and integrating Turner’s sports activities rights with Paramount’s present portfolio may unlock value synergies and recent alternatives.
The scale of a WBD buy dwarfs the Paramount deal. WBD’s enterprise worth is now about $71 billion, in comparison with the $8 billion Skydance paid for Paramount Global. The sheer debt burden of WBD poses a problem, with analysts cautioning that prime leverage may deter a lovely bid.
Moreover, regulatory hurdles loom bigger than in the Skydance-Paramount tie-up. The latter was considered as a vertical integration, a studio shopping for a distributor, whereas a Paramount-WBD mixture would merge two of the world’s largest media gamers. Senator Elizabeth Warren has already signalled robust opposition, calling the proposal “a dangerous concentration of power” that ought to be blocked.
Political shadows
The regulatory panorama is additional sophisticated by politics. The Trump administration permitted the Skydance-Paramount merger after Skydance made concessions, together with scrapping variety initiatives and funding an ombudsman at CBS News. Critics corresponding to Warren have alleged that Paramount’s $16 million settlement with Trump over a lawsuit regarding CBS was successfully a bribe to easy approval.
These allegations, mixed with Trump’s declare that Paramount pledged tens of millions in free promoting, have intensified scrutiny of Ellison’s ambitions. Whether such a politically charged deal may win regulatory clearance is unsure.
Despite the obstacles, Warner Bros. Discovery’s chief govt David Zaslav could discover his imaginative and prescient of media consolidation coming true. He has lengthy argued {that a} fragmented sector should streamline to compete with international tech giants. With Trump’s second time period in workplace, Zaslav believes regulatory approval for mergers could also be extra forthcoming.
For Ellison, the gamble is obvious – seize Warner Bros. Discovery now to cement Paramount Skydance as a dominant power in streaming and content material, or danger dropping the crown jewel of Hollywood to a deep-pocketed rival.