Long, long rumored, but now confirmed by multiple media reports, it looks like Warner Bros Discovery and Paramount Global are in very early talks to merge.
The deal would see the owner of HBO, DC and CNN link up with the owners of CBS News, Star Trek and the home of Mission Impossible and Top Gun.
The deal would bring together two of Hollywood’s “Big Five” studios with a combined market value of at $38 billion.
Talks are at such an early stage that no deal is yet certain, but Warner chief David Zaslav and Paramount boss Bob Bakish discussed a possible deal over lunch in New York this week, according to sources at Axios.
This is a major response to the competition from Amazon and Netflix that have caused studios to dive headlong into their own streaming services, saturating the market and diluting content profitability.
Both Warner and Paramount have had to cut costs dramatically as they try to minimise billions of dollars of losses from their own streaming services.
They are not alone. Every major studio who jumped into streaming with both feet is now feeling the pain.
With stock prices down and losses mounting, it is thought they would look to combine HBO Max and Paramount Plus quickly to take the fight to the big two streamers and Disney+.
Paramount in particular is under investor pressure to find a partner due to heavy debt burden from its streaming investment.
According to Axios, the chief executives discussed how each company’s main streaming service, Paramount Plus and Max (formerly HBO Max), could merge to better take on rivals Netflix and Disney Plus.
Paramount is under a lot of pressure to find a buyer or strategic partner because of its levels of debt accrued in recent years whilst bulking up its streaming service.
It is rumored that more consolidation will be coming, as studios can no longer sustain their current business models in the face of Netflix and Amazon’s deep pockets and sheer weight of subscriber numbers.
With Disney a big enough beast, and MGM now in the hands of Amazon, that would leave Universal and Sony to explore options to respond.
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