"Is That Legal?" and Other Urgent Questions About Paramount Skydance's Bid for Warner Bros. Discovery

The Potential Merger of Paramount and Warner Bros. Discovery

After waiting almost a full year for the merger between Skydance and Paramount to finally close, there's already talk that another major studio could be in for a big upheaval. According to a report from The Wall Street Journal, Paramount Skydance is reportedly preparing a majority cash bid for Warner Bros. Discovery (WBD), backed by David Ellison and his father Larry Ellison. This potential deal would aim to acquire all of WBD, including its movie studio, library, and cable networks.

WBD stock prices saw a significant jump following the report, but many are skeptical about whether this deal will actually come to fruition. Combining two of Hollywood’s most iconic legacy studios seems like an unlikely move, and some might even find it a bit unsettling. However, this isn’t the first time we’ve seen such large-scale mergers in the entertainment industry. Companies like Disney, Amazon, and others have already made their mark through acquisitions, and it's likely not the last of its kind.

There’s also no guarantee that this deal will happen. M&A activity often involves companies exploring options, only for things to fall through later. The Paramount-Skydance deal itself took a long time to finalize, and it's possible that this new proposal could face similar challenges.

Legal Concerns and Antitrust Issues

One of the immediate questions is whether this merger would be legal. Would combining the power of Paramount/Skydance with Warner Bros. Discovery create a monopoly? A company of this size would certainly draw attention from regulatory bodies like the Justice Department. The previous Paramount-Skydance deal didn't go through until CBS News settled a lawsuit involving President Trump, and the new owners agreed to appoint an ombudsman to oversee CBS News.

The question remains: how would the current administration react to such a massive merger? There's also the issue of the Federal Communications Commission (FCC), which typically restricts media conglomerates from owning more than one broadcast channel. However, recent history shows that companies like NBCUniversal and Fox have managed to operate multiple channels without facing major issues.

Streaming Services and Consolidation

David Ellison has already expressed his interest in improving the streaming experience for Paramount+. He plans to combine Paramount+ with Pluto TV, an ad-supported service, to attract more users and reduce costs. If this merger were to happen, adding HBO Max into the mix could significantly boost the number of subscribers. With 77 million on Paramount+ and 125 million across HBO Max, Discovery+, and HBO’s linear channel, the combined service could rival Netflix and Disney+.

However, consolidating multiple streaming services might not be necessary. Disney has already started integrating Hulu into Disney+, suggesting that a similar approach could be taken with Paramount+. While HBO as a brand is valuable, it's unclear what use Paramount and Skydance would have for it.

The Fate of TCM

Another concern is the future of Turner Classic Movies (TCM). This channel plays old films without commercials, making it an anomaly in today's market. When The News Pulse raised concerns about TCM disappearing under David Zaslav’s leadership, he personally advocated for keeping it. But would David Ellison share the same level of nostalgia for the channel?

Why Acquire Both the Movie Studio and Cable Networks?

What makes this report particularly intriguing is that Paramount Skydance is reportedly interested in acquiring all of WBD, not just the movie studio. The cable networks, including CNN, TBS, TNT, and others, are not as valuable as they once were. Zaslav recently announced plans to split the company back into separate entities, making the movie studio more attractive to other buyers. Tech giants or private equity firms could step in and avoid the burden of struggling cable networks.

Paramount may see value in having these networks alongside Comedy Central and MTV, and they might want to combine WBD’s sports rights with their own. While the cost would be high—$41 billion plus $35 billion in debt—Ellison has the financial resources to make a move early in a potential bidding war.

Impact on Jobs and Company Structure

The original Paramount-Skydance deal involved significant cost-cutting measures, resulting in thousands of job losses. A merger with WBD could lead to even more layoffs, especially if departments like Warner Bros. Pictures and Paramount Pictures are consolidated. It's also unclear if both studios would need separate lots or if additional jobs would be eliminated.

Despite the uncertainty, there's a silver lining: Superman could finally team up with the Transformers in a crossover event.