Warner Bros. Discovery Auction: An inflection point for the industry

What was the outcome? The sale of Warner Bros. Discovery will be a pivotal event for the industry.

Whatever deal evolves from the Warner Bros. Discovery (WBD) sale, and there will no doubt be one whether it is a total buy out or partial purchase of the filmmaking studio, it will transform the industry. This looks to be the build of a new Hollywood: the consolidation of content, production and streaming. Add Artificial Intelligence into the mix and the future looks very different to today’s landscape. It’s been apparent for some time that consolidation of the moving parts of film, TV and streaming will enable the players to extract exponential gains whether by means of acquisition of Intellectual Property, access to franchises, reach for subscribers or ability to produce content.

Paramount, Comcast and Netflix each submitted non-binding bids for all or part of WBD last week. The value of the deal is thought to be around $60 billion.

The success or failure of any deal is best evaluated post deal: what was the outcome? In the case of the Discovery £43billion takeover of Warner Media from AT& T in 2022, it does not look to have been a great success. Straddled with a huge pile of debt and even after considerable cost saving exercises and employee layoffs, Warners has put up the For Sale sign.

Paramount looks the initial favourite to secure a deal. It is led by David Ellison, son of Larry Ellison, Co-Founder of Oracle, one of the world’s richest men who has close ties with President Trump. Another dynamic to any future deal is the rumour that David Ellison has had discussions with Middle Eastern sovereign funds to secure outside money.

To date Netflix has relied primarily on organic growth to build the business. However, a deal with WBD would give them access to franchises including Superman and other DC Comics, The Matrix, Games of Thrones and Harry Potter: all very attractive. If their bid was successful, it would add 73million subscribers from HBO and HBO Max to its current 300million subscriber base. That, however, would raise potential anti-trust law issues.

Comcast, which owns NBCUniversal, would appear to be an attractive bidder to the WBD CEO David Zasav who spent his formative years there. WBD has huge appeal to the Universal theme park division that would be able to build attractions such as Batman and Superman. A negative for Comcast is the apparent disfavour shown by President Trump in his Truth Social posts

Whatever the outcome of this deal it is probable that it will lead to employee layoffs in a merged entity which along with the efficiencies being developed using artificial intelligence makes a many industry professionals feel rather uncomfortable.

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