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Potential Warner Bros.-Paramount Merger ‘Financial Death Sentence,’ Analysts Say
By Movieguide® Contributor
Wall Street analysts are expressing concern about a potential merger between Warner Bros. Discovery and Paramount, with WBD purchasing Paramount.
“We have a hard time seeing [a deal],” one report stated, likening the potential partnership to catching “a falling knife” and calling it a “financial death sentence.”
TD Cowen analyst Doug Creutz explained that it seems unlikely the Federal Trade Commission and Department of Justice would agree to this deal.
“It would involve merging two of the five remaining major movie studios, two major television studios, and would create a very high concentration of linear network ownership (which last we checked is still a very large and EBITDA-positive business even given cord-cutting), including a significant consolidation of major sports rights,” Creutz said.
He called the deal “a mistake” in the long run for Warner Bros. Discovery, adding, “Paramount would bring a lot of content ballast to the table, but much less in terms of premium, long-tail franchises, and WBD already has plenty of breadth of content.”
Another film finance executive told Deadline he was unsure of how this would be beneficial to shareholders: “How do these two companies pay down their debt…and build value so their share price, which has been in the toilet, can grow?”
Investors were not pleased by the idea of a merger — Paramount’s shares went down by 1%, while Warner Bros. Discovery slipped 4% — and viewers aren’t happy, either.
The Verge wrote of potential price hikes for streaming subscriptions, as well as “the simple consolidation of entertainment companies — and thus the decrease in the number of people deciding what gets greenlit and made.”
“If Warner Bros. Discovery does succeed in buying Paramount,” they warned, “Streaming will get more expensive — and the content will get even blander.”
Movieguide® previously reported on the studios’ talk of a merger:
Warner Bros. Discovery and Paramount are in early discussions to merge into a single conglomerate.
The company’s CEOs, David Zaslav and Bob Bakish, met earlier this week to discuss the possibility of Warner Bros. acquiring Paramount. The pair discussed how the companies would complement each other in their film, TV and streaming ventures.
While the deal is nowhere near completion, the merger of Warner Bros. Discovery and Paramount would prove to be a massive changeup in entertainment with the potential to create a major powerhouse that could take over the industry.
However, investors don’t seem pleased by the prospect. CNN reported, “Since news of the potential deal broke on Wednesday afternoon, shares of Warner Bros. Discovery have dropped by over 5%, while Paramount’s stock rose initially on the report but returned to the level it was trading at before the report came out.”
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