Warner Bros. & Paramount Merger Talks: What To Know
This week, news about a potential merger between Paramount Global (PARA.US) and Warner Bros. Discovery (WBD.US) made the headlines, sparking talks about the future of Hollywood studios. It is no secret that the change in viewers’ habits, boosted especially during the pandemic era, makes managing boards of the largest studios reconsider their strategies to be able to survive in the future.
In this article, we will share some insights regarding the potential merger of these Hollywood studios that could change the entertainment industry in the future.
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Warner Bros. And Paramount Discuss Potential Merger
Media reports suggested that Warner’s CEO, David Zaslav, and Paramount’s CEO, Bob Bakish, met in New York to discuss a potential merger between the two studios. Axios’ reporters mentioned that the Warner Bros board has even hired banking consultants to examine how the plan could materialise.
Warner Bros. Discovery is the larger company in this pair as its market value exceeds $29bn, while Paramount’s value is close to $10bn. Analysts note that Paramount has been seeking to find partners for quite some time as its debt levels have increased significantly on the back of its online expansion. On the contrary, Warner Bros. CEO told investors some weeks ago that cost cutting strategies and debt reduction would allow the company to spend some capital on growing the studio by acquisitions or other means.
One more element that could play a role in a potential merger is that Warner Bros. Discovery can become a part of another such deal two years after Warner Media and Discovery became one entity. Warner Bros. Discovery wasn’t able to make such deals as its last merger in 2021 took advantage of the Reverse Morris Trust transaction structure benefits.
What’s Going On With Top Studios In Hollywood?
Warner Bros. and Paramount are two of the largest studios in Hollywood. The Big Five include Walt Disney Studios, Sony Pictures and Universal Studios. The Big Five gets 80-85% of the US box office revenue on a yearly basis. All five of them were founded in the first decades of the twentieth century.
Online streaming services that bloomed, especially during the coronavirus pandemic, such as Netflix have forced the Big Five to reconsider their strategies when it comes to producing and delivering content.
In this case, Paramount’s Plus streaming service could become one with Warner Bros.’ popular HBO Max to counter the impact of Netflix and Disney Plus in the market. Netflix is one of the biggest players with more than 270 million subscribers, a significantly higher number than Paramount Plus’ 63 million and Warner Bros Discovery's 95 million.
Generational Disruption Impacts Big Studios
Speaking in a summit organised by the New York Times in late November, Warner Bros Discovery CEO David Zaslav said that “generational disruption that is impacting the industry requires more aggressive, tougher, faster, decisions.”
Zaslav mentioned the difficulties that studios face, noting that “the moment “requires very hard decisions, and many of them are unpopular. It’s a very scary time, but it’s also an exciting time because of what’s possible. We were the first ones through. We needed to get healthy and needed to build a real business around this company.”
Learn More About Warner Bros. Discovery
Warner Bros. Discovery has demonstrated robust performance in 2023, boasting a diverse portfolio of channels. The company's US Networks Group, including Discovery, Food Network, HGTV, ID, and TLC, played a vital role in boosting third-quarter success, with TLC ranking as the #1 cable primetime network.
Additionally, TNT secured a significant share of viewing in the second quarter. Lifestyle and entertainment brands, including Animal Planet and Science Channel, contributed to Warner Bros. Discovery's dominance, ranking among the top 10 cable networks in the first quarter. The company's sports division, Discovery Sports, engages 130 million people monthly through its sports brands and platforms.
The Warner Bros. Discovery quarterly revenue report showed its robust performance, with a substantial contribution from its networks segment, generating $4.87 billion in Q3 2023.
The Who Is Who Of Paramount Global
Paramount Global has exhibited notable performance in 2023, marked by a substantial increase in global total viewing hours across Paramount+ and Pluto TV, rising by 46% in Q3 on an annualised basis.
The company's extensive portfolio, featuring popular consumer brands such as CBS, Showtime Networks, Paramount Pictures, Nickelodeon, MTV, Comedy Central, and BET, has contributed to its success. Paramount Global's growth is also reflected in its channel count, surpassing 1,600 in Q3 2023.
Trading The Big Studios For Beginners
Rumours regarding mergers such as the one between Warner Bros. and Paramount can move markets as investors and traders could try to take advantage of developments. Beginner traders may feel the urge to react quickly but, since they likely lack the necessary experience, it would be wise to refrain and proceed with caution.
Beginner traders should spend some time studying educational materials such as articles, how-to guides, videos or e-books that can help them familiarise with the trading concept until they start to gain valuable experience.
One more thing that beginner traders should become accustomed to is using risk management tools. Trading mistakes or not data-driven trading actions could lose to the loss of valuable funds. Risk management tools provided by brokers such as stop-loss or take-profit orders are an additional layer of risk management that is useful when planning your trading strategy.
Educating yourself as a trader and learning the fundamentals should be your top priority as a beginner trader. With the abundance of educational materials and risk management tools there is no reason not to.
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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.