- Warner Bros. Discovery chief David Zaslav is in deal talks with Paramount, Axios and others reported Tuesday.
- A deal might create one other leisure big and kick off extra media consolidation.
- Analysts have questioned the advantages of such a mixture, although.
David Zaslav rocked the leisure trade in 2022 with a historic merger, following it up by slashing prices on the newly created Warner Bros. Discovery to chop debt and set the corporate up for development with a brand new streamer, Max. Within the course of, he laid off 1000’s of workers, shelved accomplished tasks like “Batgirl,” made a disastrously ill-fated determination (since reversed) to place Chris Licht in command of CNN, and usually outraged Hollywood.
Now, with a bunch of free money move and the swagger to go along with it, plus the necessity for scale to compete with Netflix and Disney, he is reportedly in talks to do one other massive deal for an additional iconic set of leisure belongings.
Zaslav has met with Paramount International CEO Bob Bakish and Shari Redstone, the proprietor of Paramount dad or mum Nationwide Amusements Inc., a couple of deal to accumulate Paramount or NAI, Axios reported as we speak.
A deal — which might take completely different types and isn’t assured — would create a brand new leisure big and will kick off extra trade consolidation as media firms scramble to discover a workable mannequin for streaming and compete with Netflix. WBD declined to remark; Paramount did not instantly reply to a request for remark.
The Axios report follows others that Skydance and its backer RedBird Capital have talked to Redstone a couple of deal for Paramount. Paramount struggles with declining income and streaming losses and an acquisition is broadly seen as all however inevitable after Redstone has proven openness to a deal after lengthy resisted promoting.
Zaslav has laid the groundwork in latest weeks for extra dealmaking. He and WBD board member John Malone each made feedback in November suggesting the corporate was paying down debt and increase free money move to arrange acquisitions within the subsequent two years.
The thought of a Paramount takeover by WBD has currently met with enthusiasm on Wall Road, the place mergers of legacy media firms are seen as a foregone conclusion. And WBD does not personal a broadcast community, which implies its acquisition of Paramount’s CBS would not be a significant regulatory difficulty — as could be the case if NBC dad or mum Comcast have been to make a deal to accumulate Paramount, as some media observers have speculated.
Needham analyst Laura Martin for one talked up a Paramount sale to WBD in November, saying its helpful belongings might be match with a much bigger firm. Paramount’s CBS and WBD’s CNN collectively would make a formidable information group, and the businesses’ streaming companies — Paramount+ and Max — have complementary strengths.
However shares of each firms declined as we speak amid information of the talks, Warner by 5.6% and Paramount by 2%, and different analysts threw chilly water on a deal being a cure-all.
Consolidation will not repair legacy media’s streaming woes, LightShed Companions argued in a December 19 notice. They’re too late and lack the expertise and technique to construct scaled streamers whereas managing their linear TV declines, and layering on extra linear TV belongings to a WBD or Paramount “appears like a monetary loss of life sentence,” LightShed wrote. LightShed’s Richard Greenfield doubled down on that argument Wednesday in an interview with CNBC, advocating for WBD to exit the streaming wars and give attention to being an ideal “arms vendor” creating content material for different consumers.
It is true that WBD and Paramount may benefit from efficiencies relating to content material creation, and Zaslav, who has talked up the worth of reside sports activities, might be Paramount’s sports activities rights as a means of boosting that a part of WBD’s enterprise, Edward Jones analyst David Heger advised Enterprise Insider.
However traders could also be gun shy given WBD’s still-heavy debt load (of $45 billion), the time it takes for large mergers’ advantages to be realized, and the potential that Zaslav would wish to boost extra debt to do one other massive deal, Heger added.
“Buyers could be in that show-me mode of, ‘How are you going to make this work?'” he mentioned.
