Warner Bros. Discovery and Paramount Global could be eyeing a combo, according to a Wednesday report from Axios that says chief executives of both media companies met this week to discuss a potential merger.
Axios, citing multiple unnamed sources, reported WBD CEO David Zaslav and Paramount CEO Bob Bakish met at Paramount’s headquarters in New York City. Discussions are in the early stage and a deal might not materialize but Zaslav also talked with Paramount-parent owner Shari Redstone, per the report. Sources told Axios the option for WBD to purchase Paramount or its parent company National Amusements Inc. (NAI) were both on the table.
Reached by StreamTV Insider, Paramount declined to comment on the report. WBD did not immediately respond to a request seeking comment.
It’s not the first report of potential acquisition talks for Paramount, which has a market cap of $10.5 billion and a long-term debt load of $15.6 billion, per Reuters.
WBD in 2022 finalized its own merger, when AT&T’s Warner Media unit and Discovery merged to form the combined company that now includes a studio business, linear networks such as CNN, Discovery, HGTV, HBO, as well as streaming services Discovery+ and HBO Max (now Max).
Paramount, meanwhile, has its own studio business, as well as broadcast assets through CBS and linear channels such as Nickelodeon, MTV and Showtime. It also has a streaming business with the Paramount+ SVOD and free ad-supported streaming TV (FAST) service Pluto TV.
A separate report from Bloomberg this week said Paramount is in talks to sell its BET Media asset to a management-led investor group. Entertainer and media owner Byron Allen was also said to revive his bid for the entertainment network.
Legacy media consolidation not the answer?
On Tuesday LightShed Partners analysts put out a post contending that all four legacy media companies need to drastically change their streaming strategies and touched on the potential for M&A. The firm disagrees with the view that media consolidation can solve the four major players’ streaming struggles.
Analysts led by Richard Greenfield wrote, “legacy media companies are simply too late and not equipped talent-wise or strategy-wise to build scaled global streaming services on top of the growing headwinds facing their linear TV assets.”
The firm does believe that Paramount will eventually be sold but doesn’t think a tie-up with WBD is the answer (nor a combo of NBCUniveral and WBD).
While noting many investors see consolidation as a potential solution, the analysts wrote, “layering on even more linear TV assets to any of these legacy media companies feels like a financial death sentence (look no further than investor concern about the health of Warner Bros. Discovery due to its high exposure to linear TV).”
There are also regulatory concerns, with Greenfield saying approval could be a challenge particularly in a 2024 presidential election year and with the current administration not favorable to consolidation.
If the political climate changes and legacy media deals could go through, the analysts noted it would mean a deal announced in 2025 that wouldn’t close until 2026.
“Legacy media companies simply do not have time to wait and hope for M&A as a strategy,” wrote LightShed. “They must take action to alter their streaming strategies immediately or their stocks will continue to suffer.”
In its prescription for Paramount the firm advised the company should scale back Paramount+ and shift aggressively towards a content arms dealer approach, which it believes “would meaningfully improve Paramount’s financial situation.”
In an earlier recent post on the potential for a sale of Paramount, LightShed noted that the company doesn’t need to sell all of NAI or itself entirely to make the above mentioned changes as, “they can take all of these actions on their own (unless of course, they simply do not believe they have the management talent to execute this dramatic strategic pivot).”
In the December 12 post analysts did say they think Paramount will “undoubtedly be sold” but questioned what the urgency around buying Paramount today is.
“Our gut is that the ‘smoke’ everyone is talking about is manufactured by Paramount to create a sense of urgency amongst financial buyers that does not exist,” LightShed analysts wrote earlier this month. “Time is on the side of the buyers.”