A Major Shift in Hollywood: Paramount Buys WB Discovery

A major shift is happening in the entertainment industry as Warner Brothers Discovery has agreed to a deal to be bought by Paramount Skydance. A couple of months ago, we thought the Hollywood landscape would have a significant change with WBD agreeing to a deal to be bought by Netflix. Now, that deal is no longer happening after Paramount was extremely aggressive in the bidding process, even to the point of considering a hostile takeover.

Netflix entered into an initial agreement to acquire WBD's studio and streaming assets for $27.75 per share, valuing the deal at around $83 billion (excluding their debt). Paramount Skydance emerged as a competitor, leading to a prolonged bidding war. Many people, including myself, expressed concerns over Netflix taking over WBD because of their previous lack of intrest in putting films in theaters. Netflix's co-CEO, Ted Sarandos, did promise to let WBD continue to operate as they have been. This deal was planned to be Netflix's step into theaters. They saw it as an expansio, not a measure to just throw all the new WB films onto Netflix instead of theaters.

Flash forward to the last couple of weeks where WBD gave Paramount one last chance. They were told that if they were serious about buying, they were to give their last and final offer. On February 23rd, Paramount Skydance submited a new all-cash bid of $31 per share for all of WBD, including its cable business, valuing the total deal at approximately $110-111 billion (including debt). This also includes a $7 billion breakup fee if federal regulators block the merger.

Over the next few days, WBD's board reviewed Paramount's bid. Reports emerged that the offer was under consideration, with Netflix given a chance to counter. David Zaslav, WBD CEO, held internal discussions on which deal to move forward with. On February 26th, WBD officially announced that Paramount Skydance's $31-per-share offer is a "superior proposal" compared to Netflix's. Netflix declined to raise its bid and they exited the bidding process. Netflix co-CEOs Ted Sarandos and Greg Peters issued a joint statement in Variety saying, "We’ve always been disciplined, and at the price required to match Paramount Skydance’s latest offer, the deal is no longer financially attractive." Netflix receives a $2.8 billion termination fee from Paramount as a part of the withdrawal.

The deal was unanimously approved by both boards and is expected to close in Q3 2026, subject to regulatory approvals, antitrust reviews (including from the DOJ and California DOJ), and a WBD shareholder vote in early spring 2026.

That is a lot of information about the deal so, what exactly does that mean going forward? The Paramount Skydance CEO, David Ellison, said they have plans to merge HBO Max and Paramount+ into a single service, potentially reaching over 200 million subscribers and creating a "premier direct-to-consumer platform". This could boost competition against Netflix and Disney+, offering a huge library including Harry Potter, Game of Thrones, DC Comics, and Paramount franchises like Mission Impossible, Transformers, Star Trek, and Sonic the Hedgehog. The goal from Paramount is to "expand consumer choice" and "expand creative freedom".

The combined entity of WBD and Paramount Skydance will aim for 30+ films annually, up from Paramount's pre-merger levels, with Warner Bros. and Paramount operating as stand-alone studios. Even though they plan to operate the two as stand-alone studios, there could be massive layoffs in order to reduce some redundancies between the two companies. Because both studios have been operating as movie and tv studios, they have some similar positions and teams that they will likely want to reduce and consolidate. Ellison targets $6 billion in annual synergies through eliminating duplicates, which could lead to "devastating layoffs" across HBO, CNN, cable networks (TNT, TBS, Discovery), and movie studios.

Both Paramount and WB have been doing well and have experienced some success over the last couple of years and leadership in both studios have done a great job picking which projects to move forward with and which filmmakers to work with. Even with the two studios operating as stand-alone studios, the impending layoffs could drastically shake up leadership and then the studios will be the same in name only, not having the same talent behind it.

In my opinion, I think the best thing would be for WBD to stay independent and not sale but that does not appear to be an option at this point. I was skeptical of the Netflix deal but was cautiously optimistic because they would basically keep everything the same at WBD. With this deal, it appears a lot of layoffs will be coming and I just hope that the leadership at each studio can remain the same. It remains to be seen how the consolidation will change the decision makers. Of course, a lot of people losing their jobs is never ideal. David Ellison is a film fan. He is a cinephile. He loves movie theaters. All of that is great. Some of the aggressive dealmaking and reliance on his family's wealth could pose a potential future problem but I love the fact that he really loves film and storytelling.

I also think as they plan to combine Paramount+ and HBO Max, a big question is what do they do with the HBO name? When you think of HBO, you think of prestige television. They have developed that reputation over many years and losing that brand value and name recognition would be a huge mistake.

We will know more as time moves forward and as plans start to be formulated. This deal will still have to be approved by the DOJ before it is officially official. This deal could potentially raise the competition between other movie studios and we could get some better storytelling all around. Or... this deal can shake up what has made Paramount and Warner Brothers successful and may not be best for creatives to have room to tell new and interesting stories. This will be a massive shift in the entertainment industry and let's all hope that the positives will outweigh any negatives.