Warner Bros. Discovery stock rallied for a second day on Friday, as investors weighed reports that Paramount Skydance is preparing a takeover bid that could reshape the US entertainment industry.
The Wall Street Journal reported that Paramount is working on a majority cash offer for Warner Bros., a deal that could be valued at around $70 billion once debt is included.
If completed, the move would combine Paramount’s broadcast and film assets with Warner Bros.’ sprawling portfolio, including HBO, CNN, and Warner Bros. Studios.
For competitors such as Netflix and Disney, the consolidation could introduce a new streaming-focused rival with the scale and ambition to challenge their dominance.
A streaming-first strategy
Analysts suggest the proposed merger fits into a broader strategy by Paramount Skydance CEO David Ellison to consolidate media assets during a time of industry upheaval.
Consumers continue to abandon traditional cable television in favor of digital platforms, pressuring legacy players to adapt or risk irrelevance.
According to MoffettNathanson analyst Robert Fishman, Paramount Skydance is likely aiming to “build a conglomerate with a streaming-first focus, wrapped with TV and film studios and potentially a larger linear television portfolio.”
Such a strategy could bring together content libraries and distribution channels at a scale comparable to Netflix and Disney+.
That prospect is already drawing attention from investors.
Shares of Warner Bros. Discovery climbed 29% on Thursday and rose another 8.6% in premarket trading on Friday.
Paramount stock also gained 16% on Thursday after news of the potential bid broke.
Pressure on Netflix and Disney
The potential union of Paramount and Warner Bros. could pose fresh challenges for Netflix and Disney, the two companies that have so far dominated the streaming wars.
Netflix has long been considered the frontrunner, benefiting from its early lead, global subscriber base, and steady content pipeline.
However, the emergence of a combined Paramount-Warner Bros. entity could chip away at that advantage.
Netflix shares slipped 3.5% on Thursday, as investors digested the possibility of a new heavyweight competitor.
Warner Bros.’ HBO Max and Paramount+ already offer competitive content libraries on their own.
Together, they could deliver a larger and more diversified catalog, potentially appealing to consumers looking to consolidate subscriptions.
For Disney, which is balancing the growth of Disney+ against slowing revenue in its linear television business, the risk is equally significant.
Paramount Skydance’s reported interest in expanding its television holdings, which includes CBS and CNN from Warner Bros Discovery, could put further pressure on Disney’s ABC and cable networks.
Meanwhile, a stronger streaming competitor would intensify the battle for subscribers at a time when profitability across the sector remains elusive.
Financial and strategic risks
Despite the bold vision, the deal faces hurdles.
Paying a 30% premium to Warner Bros.’ pre-rally stock price would value its equity at around $40 billion, and once net debt is included, the transaction would reach approximately $70 billion.
Analysts estimate that Paramount would need to extract $5.5 billion in synergies on top of Warner Bros.’ projected 2026 operating profit to justify the purchase price.
Achieving such savings could prove difficult, as both companies have already undertaken significant cost-cutting measures.
For Netflix and Disney, the potential tie-up signals a shifting competitive landscape.
While neither company faces an immediate loss of market leadership, the prospect of a newly scaled rival adds urgency to their efforts to maintain subscriber growth and profitability.
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