Warner Bros Discovery faces takeover battle as streaming giants seek greater scale

When David Zaslav orchestrated his £43 billion acquisition of Warner Bros, it was hailed as a masterstroke for the long-serving chief of Discovery. Transforming himself from custodian of lesser-known TV channels to head of a Hollywood powerhouse, the deal handed Zaslav access to iconic franchises such as Harry Potter and Batman, as well as the highly sought-after streaming platform, HBO Max. Yet a little more than three years on, Warner Bros Discovery finds itself as the potential prey rather than the predator.

The company has recently launched a strategic review following waves of interest from prospective buyers, keen to acquire its formidable assets. Paramount Skydance, led by David Ellison, son of Oracle’s Larry Ellison, has emerged as the frontrunner after its own transformative merger earlier this year. Paramount Skydance has already tabled three bids, each rebuffed by Warner Bros Discovery, with the most recent arriving just days before the strategic review was announced.

Media analysts anticipate a new round of consolidations in the US entertainment sector, driven by the disruption of traditional pay-TV networks and the relentless advance of streaming giants such as Netflix and Amazon Prime Video. The shift to streaming has upended legacy revenue models and intensified competition for the finite number of household subscriptions consumers are willing to maintain.

Owning unique and attractive content libraries is now the currency of power in the streaming wars. Warner Bros Discovery, with its extraordinary collection of film and television assets including DC Studios, the Warner Bros Motion Picture Group, and HBO, has become an especially attractive prize. Bank of America’s Jessica Reif Ehrlich remarks that Warner Bros simply possesses “the best, biggest and most successful TV and film library”, a view echoed broadly across financial circles.

Paramount, similarly steeped in Hollywood lore, has a well-monetised back catalogue that includes hits such as The Godfather and Titanic. Yet the consensus suggests that its library has been more heavily exploited and lacks the volume of enduring film franchises enjoyed by rivals like Disney and Warner Bros. Paramount’s recent focus has been on boosting Paramount Plus, which reported modest profits before its merger, but its churn rate remains notably high at 7 per cent, compared to Netflix’s best-in-class 2 per cent.

A merger between Paramount Skydance and Warner Bros Discovery could rapidly elevate the combined platform’s subscriber base towards the level of Disney, while also reducing marketing and operational costs. Such a move would represent a significant threat to smaller competitors, and could prompt aggressive strategic shifts across the sector. Meanwhile, Comcast has been named as another potential bidder, and the group’s control of Universal Pictures and the Peacock platform could deliver substantial synergies should a deal transpire.

Netflix, by contrast, maintains it has “no interest in owning legacy media networks”, but it must now assess the possible impact a more powerful competitor might have on audience engagement and future advertising revenues. As consolidation continues, concerns surface regarding consumer choice and the fate of smaller and medium-sized film releases, which often rely on a diverse studio landscape for distribution. The outcome of this corporate tussle promises to reshape the landscape of global entertainment in the decade ahead.