Paramount Skydance’s $110 billion bid for Warner Bros. Discovery is not just a Hollywood deal. Powered by $24 billion from sovereign wealth funds in Saudi Arabia, Qatar and Abu Dhabi, the proposed merger is sparking debate over soft power, influence and media independence at a company that includes CNN and HBO.
Saudi Arabia’s Public Investment Fund (PIF), Abu Dhabi’s L’imad Holding Company, and the Qatar Investment Authority (QIA) are jointly putting up a total of $24 billion investment into the Hollywood mega merger — a power move that coincides with efforts to build local entertainment industries across the Middle East.
In an SEC filing, Paramount said the investors will not receive governance rights, including board seats or voting rights, so their involvement will not require a sign-off by the U.S. Committee on Foreign Investment (CFIUS).
The question, however, isn’t whether the Arab funds have formal voting rights — it’s whether a $24 billion stake can ever truly be passive inside a company that controls CNN, HBO and one of Hollywood’s most powerful IP libraries.
Before pulling out of the deal, Netflix co-CEO Ted Sarandos – speaking to the BBC in London on the morning after the recent BAFTA Film Awards – called the Gulf sovereign funds backing Paramount’s bid a “bad idea,” noting that they are from “a part of the world that is not very big on the First Amendment.”
“It seems very odd to me with the level of investment that we’re talking about that they’d have no influence or editorial control over media in another country,” Sarandos added.
“They may be sleeping partners. But there will probably come a time when they are going to wake up and want to exert their influence” agreed Middle East analyst Neil Quilliam, partner at Azure Strategy in London.
“Big sovereign investors negotiate the level of visibility they want into strategy and major decisions,” said New York-based lawyer and analyst Irina Tsukerman. “They automatically get ongoing access to leadership and leverage tied to future financing, even without publicly acknowledged voting rights,” she pointed out.
“Would you spend that kind of money to just be a silent partner? “I doubt it,” said Dubai-based media consultant Mazen Hayek who is a former spokesman for regional broadcasting powerhouse MBC Group.
“Does it guarantee you direct influence? No, it doesn’t,” he added. “At least not in normal corporate America,” according to Hayek.
Quilliam underlined that the decision on the part of Saudi Arabia, Qatar and Abu Dhabi – which is part of the United Arab Emirates – to join forces on this Hollywood mega deal marks “an unusual three-way alliance,” especially at a time when tensions are simmering between Saudi and the UAE who are on opposite sides of Sudan’s civil war.
But these Gulf countries are casting aside their differences because “They’ve got their eye on the bigger prize,” Quilliam noted. That reward being that “all three Arab states want to occupy a major place in the global media space.” So they are “really stepping up to project their [soft] power beyond the region.”
“They are looking for ways to diversify from their oil-based economies,” said Georgetown University political economist Robert Mogielnicki. And “Pushing into the entertainment realm is an important part of their broader economic diversification strategies.”
But what’s in it for them?
Besides the prestige of being minority partners in the Hollywood mega merger “They get a piece of IP, a movie premiere, a movie shoot: all they care about is reputation and soft power,” says Hayek. At a more granular level, there could be synergies between Saudi-owned MBC’s Shahid streaming service and HBO Max, he noted.
Saudi Arabia – eight years after the removal of its religion-related ban on cinema – has major moviemaking ambitions as part of the kingdom’s larger efforts to transition from an oil-based economy to becoming a digital world player.
Hollywood, meanwhile, is beginning to move past the backlash caused by the grisly murder of U.S.-based journalist Jamal Khashoggi at the Turkish Embassy in 2018 which was attributed to Saudi agents following an investigation. The Saudi government denies involvement of its top leadership.
Saudi money has already found its way in Hollywood through multiple splashy deals. To name one, Electronic Arts, the maker of video games like “Madden NFL,” “Battlefield,” and “The Sims,” in October was acquired by an investor group led by Saudi Arabia’s sovereign wealth fund in a massive deal valued at $55 billion.
Qatar, after being put on the global map by Al Jazeera and the 2022 FIFA World Cup soccer tournament, is now turning to film and TV and courting Hollywood. This became crystal clear last November during the Industry Days component of the new Doha Film Festival that were attended by top executives from Sony Pictures and U.S. indie studios Neon, A24, Department M and Miramax that is jointly owned by Qatar’s beIN Media Group and Paramount Global.
Meanwhile, Hollywood-backed theme parks have been sprouting in the region. In May, the Walt Disney Company announced plans for its first theme park in the Middle East in Abu Dhabi, joining the nearby Warner Bros. World resort on Abu Dhabi’s Yas Island.
That said, the broader issue remains that “Hollywood is not used to Arab money in media,” Hayek pointed out. “They are used to Arab money in strategic places: in airports and football clubs and shopping malls,” he noted. But they are not comfortable with Arab countries owning even a relatively small interest in the parent company of a global news operation such as CNN.
CNN in fact could become the main stumbling block for the Paramount Warner Bros. merger from a regulatory standpoint. But it’s probably not an insurmountable obstacle.
François Godard, an analyst at Enders Analysis, has pointed out that the U.K. regulator recently blocked a deal for RedBird Capital Partners — backed by Abu Dhabi-based International Media Investments (IMI) to buy the Telegraph Media Group.
However the EU regulator is likely to be more lenient than its British counterpart since CNN is “not a significant player in Europe’s national media landscapes” said Max von Thun, director of Europe at the Brussels-based Open Markets Institute. Von Thun also noted that, more in general, the EU “rarely blocks merger deals.”
As for how the foreign investments would sit with the U.S. regulator, Mogielnicki said that for Arab sovereign funds in the U.S., there are now “fewer hurdles, and they are easier to get over than in the past.”
“The FCC, the Justice Department, and national security review bodies will still run through the formal processes,” said Tsukerman.
“But leadership in those institutions reflects the administration,” she added. Especially now, under U.S. President Donald Trump, “appointees tend to follow his instincts – and sometimes explicit direction – on foreign investment.”
And, as Tsukerman noted, since Trump “has already been comfortable operating alongside Saudi-backed capital, regulators under him are unlikely to treat the same capital as automatically disqualifying in a media deal.”
variety.com
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