Warner Bros. Discovery’s bidder selection is expected to accelerate this week.
Monday marks the deadline for the second round of proposals, and Warner board members expect to expect sweet bids from three rival companies vying for the award. Comcast, Paramount and Netflix each submitted non-binding initial offers last month, forming the auction floor.
Warner bankers have privately told interested parties that this round may not be final, but they hope Monday’s bid will help narrow down a preferred merger partner, said a person close to the process who was not authorized to comment.
Warner Bros. Discovery hopes to make a decision before the winter holidays begin.
“The global media industry stands on the precipice of historic change,” Bank of America media analyst Jessica Lief Ehrlich and three colleagues said in a research note Monday.
The sale of Warner Bros. would be the biggest consolidation for Hollywood since the acquisition spree that began 30 years ago with Walt Disney Co.’s acquisition of Capital Cities, which owned ABC and ESPN. That era culminated in the early 2000s with AOL, a dial-up Internet service provider. AOL is a disastrous union that plundered the value of Warner’s prime assets. It took more than a decade for the company to recover.
Since then, Netflix, Amazon and Apple have flocked to the space, ushering in a streaming revolution that has dramatically changed consumer behavior, leaving the entertainment industry’s financial foundations of expensive cable TV bundles and blockbuster theatrical releases on shaky ground.
Warner’s current bidding war “reflects the economic reality that mid-sized legacy media studios and companies can no longer compete with the unit economics of Netflix and the ecosystem of large tech companies such as Amazon,” Bank of America analysts wrote.
They noted that both Larry Ellison’s Paramount and Comcast’s NBCUniversal may feel the need to go big and could target Warner assets, including Warner Bros.’ film and television studios in Burbank, the premium channel HBO, and streaming service HBO Max.
Representatives for Warner, Paramount, Comcast and Netflix declined to comment.
Paramount is seen as the most likely winner, given the Ellison family’s vast wealth and political connections.
President Trump considers Larry Ellison among his friends, which could secure a relationship with the U.S. Department of Justice. The president has indicated he wants Ellison to take control of CBS (now owned by Paramount Skydance) and CNN, which is owned by Warner Bros. Discovery.
Paramount has expressed interest in acquiring all of Warner, including cable channels such as TBS, TNT, HGTV, Food Network and Animal Planet, and has proposed the most efficient acquisition. The tech scion began bidding privately in September and had submitted three offers by mid-October.
However, Warner’s board of directors rejected all three offers, saying they were too low. The company then allowed Comcast and Netflix to enter the space.
According to two people familiar with the matter, Mr. Ellison recently visited oil-rich Middle Eastern countries and held preliminary discussions with sovereign wealth funds about possible investment if Paramount wins the Warner auction.
Warner Bros. Discovery stock traded at about $24 on Monday.
Some analysts are predicting a sharp rise for Comcast, which is owned by the company.
Experts say the company prefers Comcast over Paramount.
Comcast has expanded its international footprint through its ownership of European broadcaster Sky.
But Comcast is heavily in debt, and its stock has been in decline for years.
Comcast and Netflix have each expressed interest in acquiring only studios, HBO, and streaming services.
Neither Comcast nor Netflix have any interest in Warner’s linear cable channels. Comcast plans to jettison its portfolio of cable networks, which includes USA Network, CNBC, MS NOW () and Golf Channel, with a decision expected to be finalized in January. The cable channel will form a new organization called Versant.
“The market is witnessing the end of the cable TV era,” Bank of America analysts said. “The Warner Bros. studio is a treasure trove of (intellectual property) from Harry Potter to DC Comics to Game of Thrones (and many more).”
Acquiring Warner Bros. and HBO would strengthen NBCUniversal’s television production capabilities and its lagging Peacock streaming service, which has struggled to produce scripted streaming hits.
Comcast executives are also eyeing Warner’s popular franchises, including Superman and other DC Comics, “The Lord of the Rings” and “The Matrix,” which could provide more characters to Universal Studios’ growing theme parks.
Netflix also sees great value in Warner Bros. franchises. Additionally, Warner Bros. Television has long been one of the industry’s most successful programming producers, producing “The Big Bang Theory,” “Ted Lasso” and “The Pit.”
Buying Warner Bros. would give the legendary movie studio a lot of wealth, something Netflix currently lacks. The streamer’s LA office is located on a relatively small lot overlooking the 101 Freeway.
Both combinations will likely prompt job cuts in the media industry. The media industry is already in turmoil with a slump in TV and film production and thousands of layoffs over the past two years.
Paramount has cut more than 2,600 employees in recent months. The Ellison family and Redbird Capital Partners integrated the Paramount acquisition in August.
Warner Bros. Discovery, also struggling with a huge debt burden brought on by its previous merger (Discovery acquired WarnerMedia from AT&T for $43 billion in 2022), has also pruned its staff.
Warner remains approximately $34 billion in debt.
