Enthusiasm and Concern Over the Deal
On Wall Street, the idea of WBD acquiring Paramount has been met with enthusiasm, as many believe that mergers among legacy media companies are inevitable. Since WBD does not own a broadcast network, acquiring Paramount’s CBS would not pose major regulatory issues, unlike a potential deal with NBC parent Comcast.
Analysts have pointed out the potential benefits of a Paramount sale to WBD. Laura Martin of Needham mentioned in November that Paramount’s valuable assets could be a good fit for a larger company. The combination of Paramount’s CBS and WBD’s CNN would create a powerful news organization, while their streaming services, Paramount+ and Max, have complementary strengths.
However, news of the talks caused a decline in the shares of both Warner Bros. Discovery and Paramount. Some analysts have argued that consolidation alone cannot solve the streaming challenges faced by legacy media companies. They believe that these companies are too late to the game and lack the necessary talent and strategy to compete with scaled streamers while managing declines in traditional TV. Instead, they suggest that Warner Bros. Discovery should focus on content creation for other buyers.
Potential Benefits and Investor Concerns
While there are potential content creation efficiencies that could be gained from a deal between Warner Bros. Discovery and Paramount, investors remain cautious. Warner Bros. Discovery still carries a heavy debt load of $45 billion, and the benefits of large mergers often take time to materialize. There is also the possibility that Zaslav would need to raise additional debt to complete another major acquisition. As a result, some investors are hesitant to fully support the deal.