So the bids are in—even if they happen to be nonbinding—and the chase has begun. Entertainment giant Warner Bros. Discovery (WBD) is up for sale, and three bids are in so far. How will it all end up? Who will walk away with all the marbles? Let’s take a look at the three parties in the fray so far, and see who is most likely to come out ahead.
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Paramount Skydance: Back to the Well
The likely front-runner in all this is Paramount Skydance (PSKY), which has placed several offers for Warner already. Paramount has the critical advantage of being in virtually all of the same markets as Warner, from regular television to streaming to studio film production.
But that is also part of the problem. Because Paramount is in the same market as Warner on virtually every front, buying Warner would pull a competitor out of the arena entirely, and add its resources and capability to Paramount’s own. This is likely to catch regulators’ attention. Given that, should Paramount buy Warner, it would also have two news channels under its umbrella: its own CBS News, and Warner’s CNN.
Given the issues Paramount had with the Trump administration just weeks ago, this should be a major red flag. But there are reports suggesting Trump supports the merger, based on word from unnamed senior officials in the administration. This may be due to the influence of Bari Weiss as Paramount’s head of CBS News, or perhaps as a lack of concern over a linear news channel that has been in open decline for years now.
Comcast: Too Big to Buy?
Perhaps the least likely to walk away with Warner is Comcast (CMCSA). Certainly, Comcast could make use of all Warner’s properties. In fact, Comcast’s position is nearly identical to Paramount’s: they share all the same industries, and thus, all the same advantages.
The problem, however, is that they share the same disadvantages. Comcast owns MSNBC, though it is likely to break that channel off into Versant. But even after the Versant split, Comcast will still own NBC, which includes NBC News. Thus, Comcast would also end up with two news operations under its umbrella. Plus, it may well be taking a competitor out of the field in movies, as Comcast has Universal under its umbrella as well.
Worse, Comcast is already under scrutiny over its previous attempts at vertical integration, a point that will likely win it few favors from regulators who are already concerned about its business practices. Given that regulators have already expressed concern, even regret, over allowing Universal and Comcast to merge anyway, this may not serve Comcast well going through the exact same process, only worse now. There is much less concern about streaming, however, as Peacock is even smaller than Paramount+, so that is unlikely to spark much concern.
Netflix: The Dark Horse
Here is where things get especially interesting, as Netflix (NFLX) has a critical edge. It—unlike both Paramount and Comcast—does not currently own a news network. This will keep Netflix mostly out of the Federal Communications Commission’s (FCC) purview. Its focus is almost exclusively on movies and streaming. Buying the Warner operation would include a slew of sound stages and production centers that would ramp up Netflix’s original content production, while also giving it access to the entire Warner catalog.
There are concerns from movie theaters that they would lose access to future Warner titles, which would hurt, but Netflix has promised to follow all current agreements. That does not preclude Netflix from simply not making new agreements in the future. However, given that Netflix already does some theatrical releasing, mostly to qualify films for Oscar contention, and has lost access to some talent over lack of theatrical distribution—reference here Zach Cregger and The Flood—Netflix may be planning to use theatrical distribution as a way to fuel future growth.
The problem here, however, is in streaming. We have already seen some regulators look askance at this deal, as Netflix represents the number one streaming platform in the market. Warner’s HBO Max, meanwhile, represents the fourth. So for Netflix to engulf the fourth-largest platform would simply improve its already-mostly-insurmountable lead and make it virtually untouchable in the field. This is a comparatively minor objection; Amazon Prime (AMZN) and Disney+ (DIS) are both still in operation and will not be put out of business over Netflix buying Warner. But the objection will likely remain and require Netflix to achieve some remedy or another to mollify regulators.
Who Comes Out On Top?
Right now, I would say the most likely winner is Paramount Skydance. While there is a risk of regulators getting involved, combining the fourth largest streaming platform with an also-ran like Paramount+ will likely not annoy regulators like Netflix does. Concerns about news purity may already be diluted from the last tangle Paramount had with the Trump administration, while Comcast would be going into this problem fresh. But in the end, only time will tell just which of these major forces ends up with all the marbles.
Meanwhile, the three firms vying for control of Warner have their own tale of the tape to tell. Netflix is the clear leader with these three, with an average price target of $139.13 per share and an average upside potential of 31.08%, it comes in as a Strong Buy. But Paramount Skydance, with its 6.59% downside risk and average price target of $14.75, is only a Hold, and the laggard of the three.
