As an instance you’ve a crush on two people and you discover out one in all them may such as you back. Do you only start dating that person, or do you discover out what the opposite person thinks, too?
That is where Warner Bros. Discovery finds itself today. The corporate has held preliminary merger talks with Paramount Global, the media conglomerate controlled by Shari Redstone. Warner Bros. Discovery Chief Executive David Zaslav met with Paramount Global CEO Bob Bakish on Tuesday to debate what a merger of the businesses may seem like, in response to people acquainted with the matter.
“Crush” may very well be too strong here. This is just not a case of each corporations lusting for one another. It’s more of a partnership of necessity. Neither company has a transparent future competing for content in a streaming-dominated world where Apple, Amazon, Netflix and YouTube owner Google have far larger balance sheets. They simply wish to survive and boost their share price.
But perhaps Warner Bros. Discovery would somewhat merge with Comcast‘s NBCUniversal — if Comcast is open to it. There could also be regulatory issues with NBCUniversal. It’s unclear whether officials would allow Universal and Warner Bros. to come back together. This yr, they’re the highest two U.S. movie studios by revenue. While smaller than Warner Bros. or Universal, Paramount remains to be a top five studio most years.
Comcast also owns cable news channel MSNBC, which can or is probably not an issue for regulators provided that Warner Bros. Discovery owns CNN.
Deal structure can be vital here. If Comcast spins out NBCUniversal to merge with Warner Bros. Discovery, it could theoretically give Zaslav debt-free earnings to strengthen the combined company’s balance sheet.
Combination of Paramount Global CEO, Bob Bakish (L), and Warner Bros./Discovery CEO, David Zaslav.
Reuters
That could be more enticing than taking up Paramount Global’s $15 billion of debt. Warner Bros. Discovery has nearly $45 billion of debt and has worked to bring down its leverage all yr by boosting free money flow. Buying Paramount Global could be viewed as starting over for Zaslav, who hasn’t made many friends in Hollywood together with his intensive cutting of each jobs and content spending.
It is also possible Comcast CEO Brian Roberts desires to hold on to NBCUniversal and is not concerned about doubling down on legacy media right away. NBCUniversal is not in merger talks with anyone right away, in response to an individual acquainted with the matter. Spokespeople for Comcast, Warner Bros. Discovery and Paramount Global all declined to comment.
Generally speaking, Comcast’s NBCUniversal has similar assets to Paramount Global. They each have broadcast networks: NBC for NBCUniversal and CBS for Paramount Global. They each own a slew of aging cable networks. NBCUniversal’s include Bravo, E! and USA. Paramount Global’s include Nickelodeon, MTV and Comedy Central. Each corporations have subscale, money-losing streaming services. Paramount Global owns Paramount+ (and Showtime), and NBCUniversal has Peacock.
NBCUniversal probably is not a merger fit with Paramount Global, though. Each corporations’ ownership of broadcast networks likely makes that deal a non-starter.
Opening discussions with Paramount Global should give Warner Bros. Discovery a read on where Comcast stands on deal-making. Is Comcast OK with Paramount Global and Warner Bros. Discovery merging? Or does Roberts wish to mix with Warner Bros. Discovery as a substitute, leaving Paramount Global without an obvious dance partner? Would that lead Redstone to selling her stake in National Amusements and letting another person, like David Ellison at Skydance, work out the longer term for Paramount Global?
Those discussions have now begun. They are going to almost definitely heat up in the approaching weeks and months. The starting gun has been fired. Welcome to 2024.
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Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC.
