Warner Brothers/Paramount Merger?

That headline feels like it’s from 2019.

Last week there was a rumor that Skydance was looking into buying Paramount, or at least buying Shari Redstone’s shares of National Amusement which amounts to the same thing as NA owns 77% of Paramount. RedBird Capital is bankrolling Skydance’s play so it looks like there is definitely something to this.

Certainly, David Zaszlav thought so, because it seems to have kicked him into a panic move to merge with Paramount.

I’m hearing how this is the best move for both studios. Personally, I think it sounds like two drunks helping each other walk down the street but if another drunk is all the help you’re gonna get then you may have to go with it.

Paramount and Warner Brothers Discovery don’t really have complimentary problems, they have the same problems. They both gambled big on streaming and lost and they’ve both been beaten to a pulp by endless rounds of merger purge. Most of the key talent links have been cut in one way or another. Warner Brothers has a major superhero franchise at a time when all of the air has left that room, a Wizarding World franchise that has underperformed of late, and a moribund Middle Earth franchise that is very dependent on picking the right talent to support it. Paramount owns a lot of franchises that are cobwebbed and likely to stay so, it also owns Star Trek which comes with Alex Kurtzman inextricably glued to it. Although Paramount does own the Yellowstoneverse, but frankly one healthy franchise does not a studio make.

The biggest problem both studios have is gigatons of debt.

Warner Brothers’ debt came from AT&T paying a ridiculous $150 billion to buy them up in the first place. When producers at Warner found out that Ma Bell was going to be their new owner they went on a ludicrous spending spree which added to the debt bomb. Back in 2018 all of the studios were convinced that their own streaming services were going be eating Netflix’s lunch. Five years later the one eating Netflix lunch is Netflix. Consequently, Plan A of “pay off all of our debt with the shitloads of money we will be making off streaming” is now looking about as sound as “meeting a late payroll by having a really great weekend in Vegas.”

I was the only one predicting it back then but #TheDarkHerald was right, streaming has been an unmitigated disaster for all of the studios that got involved in it. The only one to do all right was Sony and that was only because their PlayStation Vue service died an early death. Tom Rothman had already gone through the stages of grief and moved on with life before Disney+ even began streaming, consequently, his studio was the best positioned to avoid the disasters that befell everyone else. And he still controls Spiderman.

Now Warner Brothers does own Discovery… Well… Actually, it’s more like Discovery owns Warner Brothers. Zaslav and company were brought in by AT&T as a turn-around team. Their job from the start was to get Warner Brothers ready for a sale. The problem is, no one wants to buy anymore. Mostly because it’s primary asset, Discovery will fly away again once Warner Brothers is sold. Zaslav will be taking his company with him when he leaves and every potential buyer knows it.

All of that said…

Paramount has a few diamond-in-the-rough assets that might just be worth the risk of a merger.

Paramount has gotten back into the theater ownership now that the anti-trust ban has been lifted. It’s not a bad idea. Normally the theatrical split works out to 50% of the gross, meaning a film has to double its budget just to break even. BUT not if you own the theater it’s being shown in. All that money is yours.

Second, while commercial-free streaming has been a financial black hole, advertisement-supported streaming is another story altogether. And Paramount owns Pluto.TV which has a monthly user base of 80 million, that is something you can work with.

Don’t get me wrong, I still think the merger is a bad idea but at this point, I don’t think they have anything to work with that can be accused of being a good idea. This bad hand may be the only one that Warner Brothers and Paramount can play.

Or Shari Redstone is just using Zaslav to bump up the price Skydance will have to pay.

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