GoKawiilToday, let’s talk about the big Paramount-Warner Bros. Discovery merger.
This deal could reshape all of media and entertainment if and when it closes. That’s still an if, which we’ll come back to — right now Paramount head David Ellison is very much acting like he’s over the finish line after outbidding Netflix, which walked away after what seemed like a done deal.
There’s a lot going on here, including the biggest question I’ve had throughout this entire saga: Why would anyone want to buy Warner, which has basically killed every acquirer it’s had for the last quarter century? I’m serious: first AOL, then AT&T, then Discovery — a lot of people have tried to change their fortunes by acquiring Warner Bros. Yet while the individuals might have walked away richer, their companies usually ended up saddled with a brutal combination of debt and regret. So why? Why do this — and why now?
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Back in January, I asked Puck’s Julia Alexander to walk me through Netflix’s reasoning, and today I’m digging into Paramount’s with Rich Greenfield, a media and entertainment analyst and co-founder of research firm LightShed Partners. You’ll hear me ask Rich a lot about the structure of this deal, and the strategy that’s supposed to help David Ellison pay for it. But there’s no getting around the numbers: Paramount is roughly 40 times smaller than Netflix by market cap, yet it offered to pay 30 percent more for Warner Bros.
You don’t need a fancy finance background to see the bigger picture here: At its core, this deal is about debt — a lot of debt. Paramount is borrowing tens of billions of dollars to make this deal happen. It has nowhere close to the amount of money needed to buy Warner for the price it had to offer to scare away Netflix.
A vast majority of the rest of the funds is coming from David Ellison’s billionaire dad, Larry Ellison. His personal fortune depends almost entirely on his Oracle stock. This is the same stock that is tied up for better and for worse with AI hype. So why is Larry Ellison willing to trade his lucrative Oracle stock for shares in a media company? And what, exactly, is David Ellison’s plan here, besides slashing a huge number of jobs when the debt bill comes due?
Certainly, the Ellisons think they can succeed where many, many others have failed — and surely they think AI has something to do with their plans. But Paramount wouldn’t be the first company killed by a Warner deal, and it really might not be the last.
Okay: Rich Greenfield of LightShed Partners on Paramount’s deal to buy Warner Bros. Here we go.
This interview has been lightly edited for length and clarity.
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