Now that Warner Bros. Discovery officially names Netflix as bidder When the carrier refuses to raise its offer, the studio is expected to agree to sell itself outright to Paramount. The next question becomes: What does the mega deal mean for David Ellison’s empire?
The partners are expected to highlight the positives when the agreement is officially unveiled, but for now Netflix revealed on Friday that it had received a $2.8 billion termination fee from Paramount to cover the Warner Bros. deal.
On Wall Street, investors have so far liked what they’ve seen from Paramount’s takeover bid, with PSKY stock up nearly 20 percent on the day since Netflix’s Feb. 26 decline.
Expect the melting ice cube metaphor to apply sooner or later as well. Analysts have long used the phrase to describe the shrinking profitability of the cable network business, once Hollywood’s profit engine, amid cord cuts. The question was: How quickly can companies merge and cut costs before the ice cube melts dramatically? Both Warner Bros. Discovery and Paramount are a lot of cable brands.
With that in mind, here’s a look at some early takes from Wall Street observers about the potential marriage between WBD and Paramount. Early reactions focused on the good, the bad, and even the ugly.
“Paramount wins” Bernstein analyst Laurent Yoon Provided in Friday’s report. But he quickly qualified it somewhat: “Overpaying for WBD to accelerate growth is probably better than facing a mediocre independent path – at least it gives them a chance at greatness, in our view. But we don’t expect them to come out swinging too strongly.”
One of the main reasons for his caution is the financial burden. “Assuming they clear regulatory hurdles, Paramount will have nearly $100 billion in debt and more than six times the leverage,” the Bernstein analyst noted. “Before they can invest in growth, they will need to cut deep and fast, allocating most of their free cash flow to interest expense and debt repayment. This is effectively the same position WBD was in from ’22 (post-merger) through ’25, a period that constrained growth despite having high-quality studios and IPs.”
MoffettNathanson analyst Rob Fishman It is more bullish on Paramount. “This deal should help the company execute on its North Star priorities, especially ‘expanding the reach of our streaming services,’” he wrote. “Paramount+ will gain a significant number of subscribers from HBO Max with less than an overlap of the reported 80 percent of HBO subscribers who are already subscribed to Netflix. “While the combined streaming services will still fall far short of Netflix in subscriber counts and engagement, the combined entity will emerge as a serious competitor to Disney and Amazon.”
Fishman has long argued that owning the entire company makes sense. On Friday, he said it “makes a lot of sense strategically by not only owning a much stronger slate of intellectual property at Warner Bros. and HBO but also using a mix of linear networks to generate higher cost synergies, unlocking strategic benefits from pairing CBS News with CNN and leveraging the longstanding CBS-Turner partnership for the NCAA’s March Madness Basketball as well as other overlapping sports rights.”
One of the key challenges will be to continue investing rather than just cutting corners towards success. “Paramount/WBD will need to maintain significant spending on content — which, in the aggregate, will rank higher than its media peers,” Fishman said. “Significant content cost reductions appear difficult to achieve through synergies alone, as Paramount previously committed to more than 30 theatrical releases post-merger as well as a significant portfolio of bundled sports rights.”
Analyst’s conclusion: “The biggest challenge facing Paramount Skydance post-merger is… balancing the content investment required to reach its strategic goals against the need to manage [debt] impact. Will PSKY attempt to deliver normally to return to investment grade, or can the company recapitalize after the deal closes to speed up the timing?
In this context, Fishman also wondered about the name of the compact giant. “The future Paramount Skydance Warner Bros. Discovery — which will need a better name — could finally transform two small-scale media companies into a more serious player in the industry, provided management has the financial flexibility to execute on its vision.”
Guggenheim analyst Michael Morris Friday also focused on the promise of volume, tempering its enthusiasm somewhat with the addition of more legacy TV channels. The deal “positions Paramount in a meaningful position to expand its studio and streaming businesses, which have attractive secular growth profiles,” he wrote. “However, it is also increasing its exposure to legacy networks, which face the challenge of disconnection, especially those networks that lack exclusive sports content.”
In addition, regulators have yet to decide on the deal. “Significant implementation and regulatory hurdles remain,” Morris concluded, noting that the company could face scrutiny over the horizontal merger of two major studios and concerns over its financing structure, which includes Middle East stocks, and could lead to a review by the Committee on Foreign Investment in the United States (CFIUS).
Take, for example, the mega deal fits into the broader trend of industry consolidation. “The deal reinforces the ongoing restructuring of the industry as traditional media companies seek to expand their reach to compete against technology giants with deeper pockets and global distribution advantages,” Morris noted.
Wolf Research Analyst Peter Supino He kept it trivial, asking in the headline of Friday’s report focused on Paramount’s fourth-quarter results: “Sky Dancers or Well Diggers?”
“Will Paramount prove to be an exercise in ‘drilling wells’ (thanks, Landman) or “Dancing in the Sky” “…hinges on two major assumptions,” he wrote. “First, will the linear TV portfolio, under the pressure of divisional cost cuts, decline slowly enough for Paramount to repay debt? Next, Paramount’s aggressive streaming growth strategy – ‘something for everyone, every day’ – needs to prove itself profitable despite lower scale than its peers (79 million global subscribers) and strong subscriber growth forecasts (2026 consensus + 4.8 million). In the fourth quarter of 2025, the new management’s second on the Head of management, both assumptions have gained a bit of ground.”
His conclusion: “Paramount Skydance faces a multi-year investment cycle and efforts to achieve efficiency against a challenging backdrop: sub-scale streaming and film assets coupled with a declining linear TV portfolio merging into a structurally challenged business.” Once combined with WBD, the company would face “the difficult task of increasing stake while simultaneously deleveraging, a balance that could come at the expense of investment in content,” Supino emphasized, and it ended up being a negative scenario. “Paramount may continue to lose share over the long term, resulting in shrinking cash flows and a deteriorating content flywheel that further pressures its competitive position.”
