How a Paramount-Warner Bros. Merger Could Hurt Netflix

Warner Bros. Discovery CEO David Zaslav. (Dia Dipasupil/Getty Images)

Key Points

About This Summary

• Warner Bros. Discovery stock rose again Friday after closing up 29% the previous session.
• Paramount Skydance is preparing a majority cash bid for Warner Bros., according to a WSJ report.
• Paramount Skydance is looking to build a streaming-first conglomerate, which could challenge Netflix.

Warner Bros. Discovery stock was rising again Friday, as investors weighed a report of interest from Paramount Skydance that could upend the U.S. entertainment industry.

Shares in Warner Bros. climbed 8.5% to $17.54 in early trading, having closed up 29% the previous session. The S&P 500 was flat.

Paramount is preparing a majority cash bid for Warner Bros., The Wall Street Journal reported on Thursday, citing people familiar with the situation. Warner Bros. and Paramount didn’t immediately respond to a request for comment from Barron’s.

It’s another sign that the CEO of the newly created Paramount Skydance, David Ellison, isn’t messing about as he tries to reshape the media landscape at a time when many customers are ditching cable TV for streamers.

“One possibility is that this next step was always embedded in Skydance’s acquisition strategy: to consolidate media assets during a period of industrywide instability,” MoffettNathanson analyst Robert Fishman wrote in a research note.

Paramount Skydance is probably looking to “build a conglomerate with a streaming-first focus, wrapped with TV and film studios and potentially a larger linear television portfolio,” he added.

It’s the sort of strategy that should make Netflix investors nervous. Shares in the video-streamer slipped 3.5% on Thursday. The company won the first round of the streaming wars by a landslide, but it looks like Ellison’s Paramount is getting ready to build a challenger.

Write to George Glover at george.glover@dowjones.com