WBD/Paramount merger - Variety: What Would Warner Bros. Discovery-Paramount Merger Mean for Cable TV? Some Networks Would Likely Be Sold Off

Story from Variety:

Mega media merger mania is once again afoot in Hollywood with very, very early talks between Warner Bros. Discovery‘s David Zaslav and Paramount Global’s Bob Bakish about a potential merger of the two companies.

Analysts and industry sources have already raised a number of questions about what a Warner Bros. Discovery-Paramount Global combo would look like and the effect it could have on the larger TV and film landscape.

The first piece of the puzzle in any serious integration plans would be sorting out what’s to be done with Warner Bros. Discovery and Paramount Global’s U.S. cable networks, MoffettNathanson’s team of media analysts wrote in a research note Thursday, after news of the merger talks broke Wednesday afternoon.

“We think any regulatory review of a Warner Bros. Discovery/Paramount Global combo would likely start with Warner Bros. Discovery’s domestic cable portfolio, which already accounts for a greater share of linear time viewed than that of any other company, even including broadcast networks,” the MoffettNathanson analysts write.

Warner Bros. Discovery is home to cable channels including Food Network, HGTV, TLC, TBS, TNT, Cartoon Network/Adult Swim, Discovery, Animal Planet, CNN, TCM, truTV, ID, OWN, among others, and co-owns Chip and Joanna Gaines’ Magnolia Network.

Paramount Global’s cable assets are BET (which it is said to be in talks to sell), Comedy Central, Nickelodeon, MTV, VH1, Paramount Network, CMT, along with a handful of smaller networks.

According to Nielsen data and MoffettNathanson’s analysis, Paramount Global’s cable networks as a whole rank second only to Warner Bros. Discovery’s in linear viewing time in most quarters. And together, the two companies would hold 35%-40% of linear television time viewed in the U.S., “a greater share than any single entity has controlled since the pre-cable network era and likely to be among the biggest sources of potential regulatory pushback.”

With the huge asterisk this is all very preliminary, sources within Warner Bros. Discovery say the likely resolution to this roadblock for a potential merger would be selling off a chunk of those Paramount Global cable channels and keeping Warner Bros. Discovery’s own larger portfolio, overseen by U.S. networks chief Kathleen Finch. Such potential sales would also lessen the blow to Warner Bros. Discovery’s existing elevated leverage.

And Warner Bros. Discovery is definitely more likely to prioritize its cable lineup, which it’s been using to promote other parts of the company, including recent large campaigns behind “Wonka,” “Barbie” and “Aquaman and the Lost Kingdom,” and constant plugs for streamer Max.

However, whatever Warner Bros. Discovery would choose to keep from Paramount Global’s offerings (Paramount Network is a solid choice, with those “Yellowstone” ratings, and Nickelodeon would give a serious boost to Warner Bros. Discovery’s kids demo on cable, and offer a huge children’s content library to stream on Max) could be well worth it, according to MoffettNathanson, which notes those combined cable assets, plus the move into broadcast with the inclusion of CBS, “would produce additional cost synergies and potential revenue (advertising or affiliate fees) synergies.”

But if Warner Bros. Discovery is looking for the most bang for their limited bucks, MoffettNathanson suggests another target: Fox.

“If Warner Bros. Discovery were really looking to make an acquisition, especially for a broadcast network, NFL and other must have sports rights, plus a leading FAST service in Tubi, 18.6% FanDuel option and even a studio lot, we think [Fox] would be a much better fit currently trading at a discount valuation and an easier deal to pull off (especially if Fox News ends up dealt to News Corp. in a side deal),” the media analysts write.