Warner Bros Discovery and Paramount in talks for huge merger

Chiefs of two of world’s biggest media companies met for several hours in New York

Warner Bros Discovery and Paramount Global held talks for a potential merger that would join together two of the world’s biggest media companies, according to reports.

The talks are in a “very early stage” and the deal may not come to fruition, people familiar with the talks said.

Warner Bros boss David Zaslav and Paramount chief Bob Bakish met on Tuesday in New York City to discuss a possible deal, as first revealed by Axios.

The merger would combine two of Hollywood’s traditional "Big Five” studios. Warner and Paramount currently have a combined market value of around $38bn (£30bn).

The moguls of the two companies reportedly discussed the merger over lunch in Paramount’s headquarters in Times Square in a meeting that lasted several hours, sources told Axios.

The pair explored how the two companies would complement each other to compete against rival platforms. One potential avenue is the consolidation of their main streaming services, Paramount+ and Max (formerly HBO Max), to enhance their competitiveness against streaming giants like Netflix and Disney+.

Mr Zaslav also held a meeting with Paramount chair Shari Redstone, whose family company holds a majority stake in Paramount, the entity that owns CBS and other television assets.

David Zaslav was the second highest-paid CEO for 2021, as calculated by The Associated Press and Equilar (AP)

The deal would see CBS News combined with CNN, and CBS’s crime dramas – such as NCIS and Criminal Minds – teaming up with Investigation Discovery and TruTV.

The two companies have faced challenges recently as consumers transitioned from cable-TV subscriptions in favour of a new wave of streaming services such as Netflix, Amazon Video and Apple TV.

The operational costs of streaming businesses are high, and they are yet to fully compensate for declining profits at traditional networks. Programming expenses, particularly for sports content, have also been on the rise.

Warner and Paramount have been forced to implement significant cost-cutting measures in an effort to mitigate losses amounting to billions of dollars from their video streaming services.

This has led to their stock prices trading significantly below the peak levels observed in the initial stages of the streaming era.

The marquee of the Los Feliz Theatre features the films Barbie and Oppenheimer in July 2023 (Invision)

Paramount is facing substantial pressure to seek a buyer or forge a strategic partnership after it reported a long-term debt of $15.6bn.

It is considerably less than Warner Bros’ debt of $43.5bn. However, in terms of market value, Warner Bros Discovery takes the lead as the larger entity, boasting a market capitalisation of $28.4bn as of the close of trading on 20 December, in contrast to Paramount Global’s $10.3bn.

Last year, AT&T’s WarnerMedia unit and Discovery joined forces to form Warner Bros Discovery, in a $43bn deal consolidating a portfolio that encompasses Discovery Channel, Warner Bros Entertainment, CNN, HBO and Cartoon Network.

The Independent has reached out to Warner Bros and Paramount for comment.