As rumors continue to persist about a potential Warner Bros. Discovery and Paramount merger, one analyst believes both companies coming together would be bad for both involved.
A recent report from THR rounded up a handful of reports from financial analysts who wrote about the deal. While a handful of them were breaking down how the financials and structure could work, TD Cowen analyst Doug Creutz noted a handful of obstacles that stood in front of the deal in his report titled “We Have a Hard Time Seeing a Paramount Merger Happening.”
“We have a very hard time believing the current FTC/DOJ, which has been very aggressive in combating industry consolidation, would give this deal a pass,” said Creutz. “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.”
Outside of regulatory hurdles, Creutz also claimed that the deal would be “a mistake” for Warner Bros. Discovery, noting that scaling up wouldn’t help the company and that Paramount’s lack of premium content wouldn’t do much to entice new users.
“Scale isn’t the solution to their problems, which are all about industry structure (if scale was a magic bullet, Disney’s stock wouldn’t be down more than 50 percent from its all-time high),” Creutz wrote. “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.”
Ultimately, Creutz’s recommendation was that both companies bundle together their streaming platforms as one product while still remaining separate companies.
What do we know about a potential Warner Bros. Discovery and Paramount merger?
Earlier this month, Axios and Variety reported that the two company’s were in discussions on the potential of a merger between both companies. Axios notes that Warner Bros. Discovery CEO David Zaslav and Paramount Global CEO Bob Bakish met with one another on Tuesday in New York City.
The details of the meeting are unknown, but the report mentions that the pair “discussed ways their companies could complement one another,” including the idea of having one singular streaming service that could better compete against platforms like Netflix or Disney+.
As of now, it’s unclear just how a merger would go, but Axios’ report claims that Warner Bros. Discovery buying Paramount Global and its parent company, National Amusements Inc., has been discussed and is “on the table.”
