David Ellison is positioning himself as Hollywood’s newest power broker, with his family preparing a bid that could put Paramount and Warner Bros. under one roof. Jason Mendez/Getty Images for Paramount Pictures
For years, whispers have percolated around a potential merger or acquisition between Warner Bros. and Paramount (now under Warner Bros. Discovery and Paramount Skydance, respectively). The tenor of these conversations just rose an octave thanks to reports of the Ellison family preparing for a formal bid. Will this be legacy studios’ best and last chance of creating a real rival to Netflix and YouTube? Or is it simply another experiment that stock-conscious executives hatched? Either way, such a deal would face enormous financial and creative challenges while also holding the potential to transform Hollywood.
Growing a content library for the sake of volume without any consideration for audience fit is like trying to explain the third act of Tenet to your grandmother—it’s just not going to make sense. But on paper, a combined entity would be armed to the teeth with top-notch brands and talents.
A WBD-Paramount merger would trigger an intellectual property field day with DC, Harry Potter, Game of Thrones, Dune, Lord of the Rings, The Conjuring, Top Gun, Mission: Impossible, Transformers, Sonic, A Quiet Place and Star Trek under the same corporate parent. Cartoon Network, which the current WBD leadership downsizedmight live once more alongside Nickelodeon as an irresistible one-two punch in kids media (or get sold off). Imagine no longer fretting about your overall TV slate because proven hitmakers Chuck Lorre, Taylor Sheridan and Bill Lawrence all work in-house on existing deals.
“The real test would be creative and product-market fit,” Steve Morris, founder and CEO of digital marketing agency New Media, told Observer.
Theatrical stakes
As of this writing, Warner Bros. accounts for 28 percent of the domestic box office market share while Paramount sits at 6.6 percent. This varies year-to-year, though. Since 2021, Paramount has enjoyed fewer tentpole peaks (Top Gun: Maverick notwithstanding) but delivered steadier conversion of awareness to theatrical intent on a film-by-film basis by opening week, according to Greenlight Analytics, where I work as Director of Insights & Content Strategy. WB’s slate has proven streakier in pre-release tracking, but its impressive highs in awareness, interest and theatrical intent tend to best Paramount’s.
Warner Bros. targets 12 to 14 theatrical releases annually, while Paramount wants to ramp up to 15 to 20 per year. A merger will almost assuredly reduce total output. 20th Century Fox released an average of 14 annual movies theatrically between 2015 and 2019. That number has dropped to around four under The Walt Disney Company’s ownership. Reducing the number of legacy movie studios again at a time when Big Tech grows stronger in entertainment by the day might cause a full-blown panic throughout the industry.
Consolidation of this magnitude usually leads to greater franchise dependency, squeezing out mid-budget and indie fare in the process. In turn, this results in less consistent volume for movie theaters (already a problem), less leverage for talent at the negotiating table, and a race toward the middle in terms of creative programming. Not fun.
Small-screen realities
WBD and Paramount collectively accounted for just over 13 percent of total U.S. TV usage (broadcast, cable, streaming) in July, trailing only YouTube, according to Nielsen’s Media Distributor Gauge. If we examine combined streaming catalog demand shares, which account for all original and licensed films/TV series on-platform, in the U.S. across 2024, we get a No. 1 ranking at 23.4 percent, according to Parrot Analytics. Even accounting for overlap across both services, the combined customers of WBD (122.3 million worldwide streaming subscribers between HBO Max and Discovery+) and Paramount+ (79 million) would pack a punch.
But WBD thought volume alone would close the gap with Netflix when it smushed together Max and Discovery+. Look at how that turned out. And while select content across Warners and Paramount commands high demand, a potential combo platter wouldn’t necessarily move the engagement needle immediately.
Unlocking the full value of the combined content catalog would require a complete overhaul of the streaming user interface and experience, an endeavor that’s as costly as it is timely. In the 2020s, with subscription fatigue already gnawing at quarterly earnings and FAST growing faster than SVOD, would both leadership and shareholders really have the patience for such an undertaking?
Talent and brand tensions
As kid-in-a-candy-store exciting as it would be for content executives to have so much franchise power and top-tier talent at their disposal, the logistical nightmare of balancing so many high-profile spinning plates boggles the mind. The Ellisons may have deep pockets, but funding always remains finite in Hollywood. Leadership would need to decide how to split the pie between, say, competing talent deals such as Tom Cruise and Timothee Chalamet (WBD) versus Will Smith and the Duffer Brothers (Paramount). How would you like to be the executive tasked with explaining to the talent why one slice is smaller than the other?
No matter which way you cut it, certain talents and brands would inevitably feel shortchanged compared to others. In a town built on egos, you might as well strike a match next to a powder keg. It’s a good problem to have, but the abundance of choice doesn’t guarantee strong strategy and execution.
Speaking generally about media mergers, Comscore Senior Media Analyst Paul Dergarabedian zeroed in on the brand issue. “Do they get diluted, spun off, marginalized, or are they exploited well to get the best results? That’s got to be part of the equation,” he told Observer.
Regulatory and financial hurdles
The list of reasons why any such deal can’t or won’t happen runs equally long as why it will. The DOJ and FTC emphasize even greater scrutiny on major M&A these days. Governing bodies would almost assuredly require divestitures, especially if a deal happened before WBD officially split off its cable assets. Some percentage of linear networks on both sides would have to go. It’s hard to see CNN existing alongside CBS News, for example. Even after jettisoning TV channels, both companies would still suffer from over-exposure to the rapidly declining linear TV business. Good luck trying to explain those numbers to angry shareholders.
WBD’s streaming division profits in part because it includes linear HBO revenues. Meanwhile, Paramount’s streaming business still wasn’t consistently profitable at the time of the sale to Skydance. On top of all that, both companies are saddled with considerable debt at the moment. It’s highly possible that any potential deal is more trouble than it’s worth.
Any combination of Paramount and Warner Bros. would yield a content slate exploding with blockbuster firepower. The new company (I’m going to start saying WarnerMount from now on) would snatch the franchise crown straight from Mickey Mouse’s head as it fed its streaming and theatrical furnace a steady diet of dynamite. But creative, regulatory, technological and financial challenges rightfully threaten to cloud the starry eyes of ambitious CEOs. (I’d love to see what the Skydance team can do with Paramount on its own).
Mergers and acquisitions have not proven to be the silver bullet Hollywood hoped they would be over the last 20 years. Would Warners and Paramount be any different? Perhaps. But more often than not, this tactic has been more exposing than helpful.
