David Ellison wants to forge a modern media and entertainment empire, and Warner Bros. Discovery will become its centerpiece.
The CEO of Paramount on Monday spoke for the first time about the $110 billion mega-deal, which will see the smaller company, backed by tens of billions from his father Larry Ellison and tens of billions in debt from a consortium of lenders, swallow the larger one.
The result will be a behemoth, with two major film studios (Paramount and Warner Bros.) a jumble of TV studios, two major streaming services in HBO Max and Paramount+, and a stable of TV channels that will include CBS, TNT, CNN, MTV, Nickelodeon, HGTV and many more that will make it a formidable player in the declining but lucrative pay-TV business. It will be a major sports player, and will combine two TV news giants in CNN and CBS.
Ellison outlined the deal as being about the future of the entertainment business:
“By uniting our iconic studios complimentary streaming platforms with a global footprint, our cable and linear networks, and our world-class IP, we have the opportunity to help shape the future and build a next generation media and entertainment company. This has been our goal since day one,” Ellison said Monday. “This is not about consolidation, it’s about reinventing the business. We want to expand our reach and enhance our ability to create the world’s most compelling stories and experiences. And we’re incredibly excited about this transaction, and it will accelerate that ambition.”
Hollywood has been wary of the deal (just as it was wary of Netflix’s deal) out of concern for jobs and production. Ellison sought to assuage at least some of those concerns Monday, reiterating that the company was not planning to pull back on film or TV production. And of particular note to the TV business, he promised continued support for HBO, telling analysts that “HBO should stay HBO” and praising Casey Bloys and his team:
“HBO is a crown jewel in this business, having brought to life some of the most powerful stories told over generations,” Ellison said. “Under our ownership, it will continue to have the resources and independence to do what it does best. At the same time, we believe in licensing our content to other platforms and producing third party content in our television studios, and we are committed to growing our studios and the popular shows they create.”
That being said, Ellison confirmed that once the deal closes, the plan is to combine HBO Max and Paramount+ into one major streaming platform.
And he committed to 45 day theatrical windows, before sending films premium video on demand (PVOD), echoing commitments made by Netflix.
But there will be financial impacts, and those remain a source of indigestion for the town. The company will have approximately $79 billion of net debt, Paramount chief strategy officer Andy Gordon told analysts on the call, and the company is targeting $6 billion in cost savings and 3X leverage within three years of closing.
That will mean lots of jobs lost, though they took effort to say that the majority of the savings will not come from labor, and “we have no intention to pull back on on production,” as Ellison said.
More to come.
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