Imagine this: Everything you could ever want to watch, from live football games to “Succession” to nearly every successful movie imaginable, is available when you choose just one app on your computer, phone, or TV. That may happen in the future as Warner Bros. Discovery and Paramount are in talks to merge.
According to two people familiar with the situation who spoke with Media Outlet, WBD CEO David Zaslav and Paramount Global CEO Bob Bakish discussed the possibility of a merger between their two businesses during their meeting on Tuesday. However, no offer is being considered, and if one is made at all, it won’t happen until the spring.
He went on to say that compared to an ad-free subscription, customers would save the most money with a tier one. This is because advertisers would find the combined subscription much more alluring and would be more inclined to increase their spending.
This is because WBD would pay higher taxes if it pursued any more mergers before April 8, 2024, due to a tax provision that was used to facilitate the merger between WBD and Discovery.
According to Jack Kranefuss, a senior director at Fitch Ratings who specializes in rating US-based media companies, the price of that combined subscription would probably be less expensive than what you’d currently pay for the two services separately.
Reaching it is the ultimate goal. According to Kranefuss, the more reach you give advertisers, the to they like it.
Naturally, this assumes the transaction makes it past the unavoidable regulatory obstacles. However, there is one more significant issue: both businesses have enormous debt loads.
Head of equity research at Hargreaves Lansdown, Derren Nathan, stated in a note on Thursday that “if a deal goes ahead, it may not be a perfect marriage.”
Representatives for Paramount Warner Bros. Discovery representatives and spokespeople declined to comment on the proposed merger.
Warner Bros.Discovery, which merged with Discovery in 2022, has been reducing expenses and winning over Wall Street with its ability to shed debt. However, at the end of it all, it held an astounding $45.1 billion.
Purchasing Paramount wouldn’t aid Warner Bros. Discovery in reducing its debt: With debt totaling $ 15.7 billion, Paramount has hardly changed this year.
Both parties would probably look to sell some of their assets to reduce their combined debt and lower their overall expenses for Warner Bros. Discovery to share some of Paramount’s debt load, according to Kranefuss. He claimed, for example, that he could see CBS or Black Entertainment Television being sold by Paramount.
It remains to be seen, Kranefuss continued, “whether or not that would be sufficient enough for investors to feel comfortable.”
It’s also possible that a deal would increase the cost of Warner Bros. Discovery’s current debt repayment. It doesn’t seem like investors are in favor of the deal.
Warner Bros. Discovery’s stock has fallen more than 5% since the news of the possible deal surfaced on Wednesday afternoon, while Paramount’s stock initially increased following the report before leveling off.