The battle for Warner Bros. Discovery is officially underway. Offers are being made. Banks have been hired. Who will wind up with the treasure trove of IP, HBO, and abundant cable TV cashflow? Will it sell as one piece? Or will it be broken up into studios and networks? The clock is ticking.
Here’s an early read on the state of play (and some odds on favorites):
Paramount: 2 to 1 odds: CEO David Ellison really, really, really wants Warner Bros. Discovery, as evidenced by multiple offers over the past month or so. Ellison’s pitch, that his company would have fewer regulatory hurdles owing to the Ellison family relationship with Donald Trump, is worth considering by the WBD board, but if a bidding war ensues, he is also positioned to sweeten the pot for the whole thing.
Comcast (5 to 1 odds): Given Trump’s personal animosity toward Brian Roberts, one might think Comcast is a longshot, but the company is eager to do deals, and new co-CEO Mike Cavanagh is telling Wall Street “I think more things are viable than maybe some of the public commentary that’s out there,” specifically citing streaming and studios as intriguing M&A targets. What does he know that we don’t?
Netflix (10 to 1 odds): The streaming giant “comes from a deep heritage of being builders rather than buyers,” co-CEO Greg Peters said last month, but Reuters reported that Netflix has hired Moelis & Co. to take a look at the WBD books. Co-CEO Ted Sarandos has said they don’t want to own linear TV networks, but what about those studios and their trove of IP?
Private equity (12 to 1 odds): WBD’s cable assets throw off a ton of cash, and are steadily declining: The exact sort of business that excites many private equity executives. The studios and streaming business is also a unique opportunity to own a top-tier brand in HBO, as well as IP whose value keeps rising. Given deep pockets, don’t be surprised to see an Apollo, Blackstone or other firm in the mix.
Sony (15 to 1 odds): When Shari Redstone was shopping Paramount, Sony Pictures was in the mi, engaging Apollo about a possible team-up for the studio to avoid regulatory concerns. Ellison, of course, emerged victorious, but if Sony was intrigued by Paramount, it stands to reason that WBD (or at least its studio and streaming business) could be enticing.
Apple (25 to 1 odds): Yes, Apple could really use the library, and HBO Max could provide a nice boost to Apple TV. But Apple just doesn’t do large scale M&A, particularly outside of its core products business. And with the tech giant wary of falling behind in AI, if it does decide to deal, why would it pursue a legacy media company instead of an AI startup? And, notably, Apple exec Eddy Cue has already been dismissive of the Warners idea.
Some combo of the above (8 to 1 odds): The thing with WBD is that there is the linear TV business, which throws off cash but is in decline, and the studios and streamers business, which is less lucrative (for now at least) but has many of the crown jewel assets. WBD could still split the company and puesue separate strategies, but it also opened the possibility of selling studios and spinning off TV.
Could, say a private equity firm (like Apollo) team up with a media company (like, Sony?) on a deal, splitting the assets? Could a pair of companies (like Comcast and Netflix?) make a joint bid and carve up the assets they want? It doesn’t seem so crazy, particularly if regulators are of concern.
