With the biggest story in entertainment being the pending merger between two of Hollywood’s biggest legacy studios, there’s quite a bit of minutiae surrounding what the merger entails, leading to quite a bit of confusion in the process. At Comic Book Clique, it is not only our responsibility but our goal to keep our readers as informed as possible. Essentially, use this as a guide of what to know about the situation to this point.
Variety put out an article earlier this week regarding David Zaslav with the implication being that he didn’t want to sell, and his fiduciary responsibility left his hands tied. For context, we aren’t too far removed from a time where Zaslav was the most hated man in Hollywood, but we also aren’t too far removed from a time where Zaslav had the most unforgiving job within the industry. Sure, the decision to move Juror #2, an old-school legal drama starring Nicholas Hoult and Toni Collette directly to streaming was controversial, and even more so when you factor in the advanced age of its director Clint Eastwood, one of the staples entrenched in the fabric of the American film industry. Then there’s the decision to shelve projects like Coyote vs. Acme and Batgirl. While these decisions are anti-art and this piece doesn’t aim to justify the decisions, it’s hard to argue the reasons behind the decisions paid off. Consider the state of Warner Bros under Jason Kilar: a DCU that was losing millions in an era where superhero films were a lock to be profitable, a scenario where he was chasing away the creators that kept them afloat, the biggest example being Christopher Nolan who had done every film in his career after Memento for Warner Bros, covering 18 years. The Dark Knight trilogy, Inception, Interstellar, and its biggest blockbusters of the century…and they lost him to Universal so he could create Oppenheimer, a film that basically made $1B at the box office while being a three hour biopic about a physicist that jumps in-and-out of color. The studio had lost its prestige, its creators, it had shrunk its theatrical window, tarnished their box office, had a streaming service that refused to make money, killed its largest IP, and AT&T, having spent an approximated $108B when factoring for the debt accumulation in the original $80B+ deal in 2018, sold it in its entirety in 2022 for $43B. That’s half the value of the dollar value of the deal, much less the extra $20B+ they took on in debt.
The new company spun-off and merged with Discovery, tabbed Zaslav as its studiohead, but the company was bare-boned, having gone through endless mergers with massive debt over the course of the century. The company was left with over $60B in debt when Zaslav took over, making operating costs nearly impossible, which is the reason AT&T had to cut their losses in the first place, and don’t worry, this concept will be coming back up with what could happen in the Paramount deal. In the four years that Zaslav has been at the helm, despite his polarizing status within the industry, Warner Bros not only slashed their debt, but they’ve fostered a creative-vision aligned with auteurs. WarnerBros has produced original films, notably films such as One Battle After Another, Sinners, F1, and Weapons, all from beloved filmmakers that value the theatrical experience, while allowing select IP to such as Superman and The Conjuring universe to be overseen with minimal-to-no oversight, and their creator-led strategy has led to the re-vitalization of IP thought to be dead, such as Final Destination: Bloodlines.
What this did? They had the highest total nomination of any studio in history at the Academy Awards, with three films in Best Picture, including the two frontrunners. They also saw a record eight consecutive films open to at least $40M or more at the domestic box office, something no studio had done in the first 100 years of the industry. Not everything has hit, for every Sinners, there’s a Mickey 17. For every Minecraft Movie, there’s a The Bride. For every Weapons, there’s an Alto Knights. However, they saw the biggest box office return of any studio not named Disney in a single year this decade, all while returning to a world where the WarnerBros logo implies an inherent quality, and creating relationships with Hollywood’s top filmmakers, as Zaslav’s regime has brought in Ryan Coogler, Paul Thomas Anderson, Greta Gerwig, Zach Cregger, Joseph Kosinski, James Gunn, Alejandro Inarattu, Emerald Fennell, Bong-joon Ho, and a true murderer’s row of high profile, visionary event filmmakers.
They’ve also turned HBO from a venture that, at the time of the AT&T deal, was losing over $2B per year into a streamer that recorded a $1.4B profit in 2025. HBO is still the standard for premiere television, but they’ve turned their Emmy success into commercial success as well. The Pitt is especially critical, but shows like Hacks, The Last of Us, House of the Dragon, and The Penguin aren’t just award players: they’re beloved content to the average household. HBO has also invested in content that’s relatively cheap to produce but can turn massive profit while also airing year round, such as their investment in Tony Khan’s All Elite Wrestling. Of course, this was one of the major investments on the television side early on in the AT&T regime, but AT&T also didn’t have the foresight or infrastructure in 2019 when Dynamite first came on air. Under Zaslav’s guidance, they’ve massively expanded their slate and seen a tremendous increase, which ended any question on if the company would ever be profitable (which, let’s be honest, anybody with a brain who follows wrestling realizes anybody argued it wouldn’t get there either didn’t understand the modern television climate or were arguing in bad faith hoping they’d fail, because any smart television executive would have done what Zaslav did for the reasons that are about to be laid out), and put them on the streamer, which allegedly does massive numbers for the streamer, per industry sources from both the wrestling side and network side. This is important because no streamer outside of Netflix has yet to turn a profit except HBO, and that kind of content may be more critical than people realize because it reduces churn rate, which is why Netflix paid an exorbitant amount of money for WWE. WWE’s historical ROI isn’t good, that’s why you see networks drop them every time the rights renewals are due, but for something like Netflix it doesn’t necessarily need high ROI as long as it stabilizes subscriptions due to a loyal fanbase. With how expensive prestige shows are for streamers such as Netflix or HBO, having a built-in audience, in theory, for content you don’t produce that guarantees you at least three hours of content per week year round, is incredibly vital in a world where people subscribe to streaming services just to watch one season of a television show. HBO also invested in sports, most notably the NHL, which does incredibly well, and because of the way live sports are, is able to charge a premium for ads, allowing for remarkable ROI. That isn’t to say that Adam Page or Nikita Kucherov, though both AEW and the NHL are not only thriving, but growing since their move to HBO, are bigger stars than Pedro Pascal, Jean Smart, or Noah Wyle, or any star of an HBO show, just that the economics are extremely different, and more service-friendly to HBO.
That’s a very long-winded way to say that David Zaslav did his job. Not only is WarnerBros still alive, they’re a viable, growing business in an industry that’s struggling more than it ever has before. Then there’s Netflix: a business that’s making a lot of money, but making a lot of unpopular choices such as price hikes, password crackdowns, ad-inserts, and a number of other things because their tech-focused business model that requires infinite growth is soon to hit a ceiling: there’s only a finite amount of subscribers to reach. Then there’s Paramount: a business that after merging with SkyDance, went from being slightly profitable year-over-year to operating at a loss of $30B. With a slate that has close to no movies longterm, things aren’t lookin’ too hot. But the Ellison’s bought Paramount, then they bought TikTok, and they already own Oracle, who run the servers for most major news outlets in the United States. The Ellison’s want a media empire, and struggle to run Paramount. Naturally, it becomes paramount (pun intended), for them to bandage it. Instead of taking the WarnerBros route and hiring creatives to invest in IP such as Star Trek, Paramount attempted a hostile takeover of Warner Bros, which, there’s a lot of reasons they would want WarnerBros, but it comes down primarily to three things: owning CNN, getting the biggest IP in the world, getting creatives in-house under contract.
WarnerBros was not up for sale, though it probably would have been eventually, seeing as that was the stated goal in 2022 when the new regime took over. At the time, Larry Ellison, the father of Paramount-Skydance CEO David Ellison, was the richest man on the planet thanks to a burgeoning Oracle stock. Those who follow that know that one day you’ll wake up and the richest man in the world will be one of any ten people, usually cycling through Elon Musk, Jeff Bezos, and Larry Page. As of September, Larry Ellison had taken over. Regardless, all of these people have more money than any of us ever will. Paramount tried to get out front, offering $19 a share, and Netflix made their offer. It was in this process where Zaslav revealed his plan to spin-off certain assets, with the cable assets (Adult Swim, TNT, TBS, HGTV, TLC, et. al.), excluding TCM, as their own separate company. This would massively decrease the WarnerBros debt even more, and they’d strip the company for parts, and focus strictly on HBO and films. Netflix offered $82B for just the movie studios and HBO assets, and WarnerBros publicly stated that companies have a week to up their offer, and Paramount didn’t, so Netflix won. Weeks later, Paramount attempted a hostile takeover to re-enter negotiations, saying their offer hadn’t been their “best” offer, for whatever reason. Any reason I give here is speculative and would veer into partisan territory, so I’d rather not explore that, considering I do have an opinion that I feel passionately about but would rather not bog down this article trashing or propping up certain companies in lieu of fact and potential outcomes.
After months of back-and-forth, where Netflix seemed to be the frontrunner because of a plethora of issues, Paramount upped their offer for everything. Originally, the Netflix deal was stronger despite its lesser dollar value, because they could still sell off the other assets and make more money than Paramount is offering in totality, not to mention the fact that the Ellison’s do have a history of agreeing to pay something in principle, and then tying mergers up in litigation so they can get it for less value, and the funding was on shaky foundation. This caused a desperate Paramount to overpay, and suddenly shareholders will get $31 per share, for shares that were worth just $7.40 when Zaslav took over four years ago.
The problem for Zaslav who clearly doesn’t want to leave is that he’d have to be able to argue he can get the shares up to a value without a bidding war within two or three years to that price, which isn’t possible, or he can be sued out of a job because of a court finding out of a Delaware case back in 1985. The Revlon rule, at its crux, and there’s a lot of nuance and detail that’s both above my paygrade and simply legal jargon you probably don’t want to read in an already-winded article, implies that the job of a board isn’t to protect the company, rather provide immediate value wherever it comes from, especially if there are sales talks. Essentially, the shareholders want it sold? The board and CEO has no choice in the matter. This ties Zaslav’s hands, who clearly isn’t happy it’s going to Paramount, to say the least.
Paramount ended up winning. What happens next?
First, we have the shareholder vote. This could be closer than a lot anticipate, as a number of the shareholders were vocally against Paramount in the bidding process. But this should pass.
We have regulation. It’s worth noting that Netflix amidst government pressure didn’t back out until immediately after a meeting with the President. Purely speculation, but Stephen Miller, Brendan Carr, and a number of cabinet officials who do have direct influence were vocally against it, unlike the merger with Paramount, so perhaps Netflix knew they’d never get it through regulation, and knew they’d get billions for free from Paramount in a termination fee for backing out. It is worth noting that Carr has been very pro-Paramount since the merger had been announced, with a focus on CNN, much like the previous Skydance process and CBS. This isn’t to say that the Trump administration is doing anything that other administrations have not done, because despite the flagrant disregard for anti-trust and monopoly laws, and the inherent anti-free market values of the deal, these laws haven’t really been enforced in many administrations, even if for the entertainment industry, the only real comparison for this is Disney’s purchase of FOX, which happened under…Donald Trump in his first term, a move that has hurt theatres significantly.
Regulation isn’t necessarily a problem for Paramount with the Trump administration, especially with how friendly they are with the administration. Objectively speaking, they are more of a monopoly with Paramount than Netflix, seeing as the two legacy studios serve the same purpose. Netflix was diversifying, while Paramount was enhancing what they already do. Netflix doesn’t have studio divisions at the level of Warner Bros, they don’t have a physical media arm, or a theatrical distribution arm, both avenues which they’ve been vocal about wanting to expand to in an attempt to compliment their primary business. There are far more redundancies, thus far more jobs at stake in the Paramount realm. Not to mention, it’s one less theatrical player, whereas Netflix would’ve maintained the same volume. This has been a major hurdle for the Ellison’s, seeing as state attorney generals, who can end the deal, are threatening legal action, while many in Congress, particularly on the left side of the aisle, are very vocally against this deal, which is why it’s imperative they get the merger through ahead of midterms, so they don’t run the risk of Democrats taking control of the chambers. They also have the EU vocally against it, and because it’s an international industry, the EU could put the kibosh on the deal.
I anticipate the deal to go through regardless, but where is the money coming from? Larry Ellison’s not the richest man in the world anymore. Oracle’s stock invested massively in AI, and as the bubble slowly pops, the stock has tanked over 60% since September, making it impossible to finance such a large deal with Oracle as collateral and Larry Ellison as the guarantor. David, his son, has put together a team that includes foreign countries financing the deal, including the Saudis, essentially making two of the three biggest American media companies in the world controlled by Saudi Arabia should the deal go through. That’s going to raise some eyebrows. But, there’s also reports that the Saudi’s are about to cut back on their spending for things such as entertainment and sports because of the on-going problems in the Middle East. While this article isn’t going to explore the geopolitics of the ongoing wars in that part of the world, if one of these ‘peace ceasefires’ that get announced every week don’t stick, Ellison might lose his funding before it even gets to the regulatory process.
Potential Outcomes?
In the grand scheme of things, there’s two ways this goes in the short-term.
Paramount merges with WarnerBros.
WarnerBros remains autonomous.
A question I’ve been asked quite frequently: why is WarnerBros still operating as if they aren’t merging?
For example, this past weekend at CinemaCon Warner Brothers announced a new specialty label ran by the former creatives of NEON. This label will specialize in creating small budget, theatrical films. How does this make sense ahead of the merger? It’s actually a move that benefits them in both possible outcomes. In the second, they have movies for when they, a movie studio, have to make movies as a business. In the first scenario, when they merge, Paramount now has creatives who specialize in creating movies efficiently and cost-effectively, and this label could become Paramount Vantage, a similar venture Paramount announced when Ellison took over that has yet to have an update.
If you’re WarnerBros, this deal is shaky in a lot of directions, you have to continue making movies. To their credit, they seem to be as well. They’ve set an 18 film slate for 2027, in yet another example of their growing slate year-over-year as they become financially stable. Funnily enough, Ellison’s big promise is that the merger is good because they can produce “30 films annually, thus bringing more films to theaters” which in a little bit we’ll go over the math as to why they won’t, but even if they did, it’d be fewer WarnerBros pictures in theaters than we’re set to get already at a 15/15 split (Paramount isn’t putting 15 movies in theaters a year, for the record, but in Ellison’s defense, it’s still on the Viacom slate, so perhaps he will, but it doesn’t seem likely considering he’s actively pulling films from cinemas in favor of Paramount+, and has yet to make any major announcements regarding the upcoming slate).
But that kind of thing will be needed for Paramount, because here’s the outcome should the merger happen:
Paramount is saddled with $79B in debt. Fitch has already relegated their stock rating of Paramount to junk. In layman’s terms: this makes moviemaking near impossible, because if the reported math is correct, they’ll owe approximately $12M per day on strictly interest, or $500K per hour. Per day, that’s the budget of an expensive indie film. The stock value is a BB+, meaning it’s fallen below the BBB- threshold required to be an investment grade. It’s essentially Wall Street’s way of telling a company that they are not a worthwhile investment and giving them money is too risky. It’s the company equivalent to somebody applying for a Discover card with a 575 credit score. You can listen to a very good explanation of the concept in more detail here.
While there are ways to help rein in budgets and create a higher ROI for movies, such as tax incentives, rebates, selling international distribution rights, etc, when movies are being made, they’re financed. This process includes bank loans, private equity, and different forms of debt financing. Essentially, you have to borrow from banks to make your movies. With a junk rating, it’s going to cost Paramount significantly more to make a movie than Disney, or Universal, or other big studios who are less risky investments. Sitting at $79B in debt, increasing in the billions per year, with operating costs soaring more than their competition, and the stock price being down across the board (though, this tends to happen with big mergers, so I wouldn’t necessarily worry too much about the stock price, but it does sort of factor in here making it worth mentioning), operating costs are about to balloon while their debt continues to exacerbate. Fitch also has the stock on negative watch, making the situation even more dire should the deal go through.
Remember earlier when I mentioned that AT&T had to sell Warner Bros for parts at a significant loss because of their debt, and that I’d circle back to it?
It’s just not a deal that makes much, if any, financial sense for Paramount at this point. They’re hemorrhaging money as is, and seem eager to take on more debt, and they still haven’t exactly explained why. Every major company has debt, and there is a difference between having and carrying debt and being in debt, and when you’re as leveraged as Paramount could become, that’s not just being in debt, that’s drowning in it, especially when they’re expected to have negative cash-flow for the foreseeable future even without this deal.
The other financing factor that’s challenging with a junk stock: institutions. Borrowing is going to be significantly harder already because of the soaring interest rates with the stock, but institutions cannot own stocks that are graded junk. Generally speaking usually being pension funds, but it’s not likely Paramount has a ton of them? But movies work with a lot of banks to finance, so banks fit the bill here more than the would a lot of other industries, and the banks that may have investments are legally mandated to sell their stock in Paramount at that point, which creates a larger problem because the low-liquidity in junk stocks makes any sale far more volatile than it would an investment-grade stock.
Paramount’s already at junk, that’s established. There’s an inherent default risk with junk, it’s basically what a junk stock is warning. Of course, the junk rating seems to be on the basis of this merger, so if the merger doesn’t go through, there’s not much to worry about? They could get back to investment grade soon, too, because they have redundancies that are going to lead to layoffs, they’ll have a lot of assets that they can sell (though, that would seem counterproductive unless they’re literally just buying the whole company so that they could get CNN, because Warner Bros was actively trying to shop those assets separately to begin with?), or they have to make less product, which goes against the very fabric of Ellison’s whole pitch to force the deal through in the first place. It’s almost as if they can’t afford what they’re promising, and we’re already seeing fewer movies from Paramount as is.
Regardless, should the merger go through, they’re going to have to sell them within five years, the way AT&T had to sell Warner Bros after four years. If you cannot afford to make your product, you do not have a business, and with the Oracle stock plummeting from what it was when Paramount started this deal, it’s not like they can just pump outside money into it like they had previously planned to.
Who would buy it remains to be seen, but I have a hard to believe, speculative of course, that Netflix didn’t read the tea leaves thinking ‘we can buy both if we’re patient for pennies on the dollar,’ making this entire process pointless to begin with.
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