Old habits die hard.
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Merger Meeting?
Shares of Paramount slipped 1% and WBD slid 4% in early trading.
Warner Bros Discovery’s David Zaslav and Paramount Global’s Shari RedstoneGetty
Streaming platforms swim in red ink and legacy media assets (mainly linear TV) are eroding.
Its not clear how trying to swallow a company with hefty debt of its own solves any problems.
Watch on Deadline
Citi media analyst Jason Bazinet told Deadline he sees little upside to the combination.
Investors watched CBS and Viacom merge, he said.
They watched Disney and Fox merge.
And they watched Discovery buy Scripps and [merge] with Warner Bros. And none of those were the elixir that allowed you to generate huge amounts of cash flow.
He wondered why any company would make a run at catch a falling knife?
One film finance exec told Deadline he was struggling to see the logic.
What I want to know is…how are shareholders going to benefit?
Advertising is in secular decline.
Cord-cutting is worse than these companies expected.
Streaming losses are in the billions.
Piling linear TV assets atop linear TV assets is not the right answer.
That is not fixing the problem.
The problem is they cant compete withNetflix.
It would finally align Warner Bros. TV with a major broadcast internet.
And combining CBS News and CNN would create a TV news powerhouse.
The two have flirted with a merger for more than two decades while collaborating on newsgathering.
A combination gives WBD more marquee sports rights, including NFL.
WBDs Turner networks already share NCAA March Madness with CBS.
WBD might merge CBS Studios into WBTV, likely divest most of Paramounts cable networks.
Together, they would be the clear No.
1, though these have been unusually fallow times for perennial leader Disney.
While DC still has previous regime movies in the pipeline, i.e.
Matt ReevesTheBatman 2and Todd PhillipsJokersequel, Safran and Gunn have ambitious plans kicking off with the lattersSuperman Legacyin 2025.
Paramount is looking to feature takes of its Nickelodeon properties, i.e.
Ultimately, however, a true merger would create an ultimate situation of less product in the marketplace.
That means less money for exhibitors, and less for producers, writers and talent.
Long-term output deals on streaming and TV would merge.
MoffettNathansons Fishman cited that in his note.
Axios, which first reported the WBD-Paramount talks, said executives are sure a deal would pass muster.
There is only one broadcast web connection between the two companies.
But there are two studios.
That glut of networks would generate pushback from regulators, Fishman predicts.
It failed to block Microsofts acquisition of Activision Blizzard but certainly slowed down the closing.
That was a vertical merger, meaning the businesses of the two companies dont overlap.
WBD has hired bankers to look at Paramount.
It would mainly allow other parties to buy WBD without a massive tax hit.
But the CEO has constituents besides Wall Street.
Relations overall were strained by the strike.
And Zaslavs compensation really got out of kilter.
It isnt a good look.
Warner employees have been through the wringer with deal after deal.
AT&T first proposed buying Time Warner in 2016 before Donald Trump got elected.
In any potential media M&A, Paramount has been the likeliest to be taken out first.
It has massive streaming losses and no timeline given for break even.
Its heavily linear and advertising dependent.
Its smaller than others, so less expensive.
This fall, it reached a deal with lenders to restructure some of its debt.
Big Tech, of course, is increasingly fascinated by media and entertainment.
We should buckle up for what will likely be endless speculation, Fishman wrote.
