Paramount and Warner Bros.: The $110 Billion Bet That Could Reshape Streaming

In this episode of Motley Fool Hidden Gems Investing, Motley Fool contributors Travis Hoium, Lou Whiteman, and Matt Frankel focus on:

• Paramount-Warner Bros. deal.
• Bundling Paramount+ and HBO Max.
• Biggest winners.
• Future of streaming sports activities.
• Peacock’s powerful spot.
• How Disney and Netflix win.

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A full transcript is under.

This podcast was recorded on Oct. 6, 2026.

Travis Hoium: The streaming wars simply took one other huge flip. Motley Fool Hidden Gems Investing begins now. Welcome to Motley Fool Hidden Gems Investing. I’m Travis Hoium. I’m joined at the moment by Lou Whiteman and Matt Frankel, guys, the massive information for the day is that Paramount has formally closed its merger or acquisition of Warner Brothers Discovery, $110 billion deal for context, that is about half the worth of Disney, however they do not have the Parks, which is the revenue driver of Disney. Matt, once you have a look at this deal, additionally $80 billion price of debt, which looks as if a notable sum of money. When you have a look at this deal and all of the competitors that is occurring within the streaming house, everyone’s elevating their costs. Does this merger, does this new firm have an opportunity to thrive in a world the place you will have YouTube with really the primary market share in streaming? You have Netflix, there’s Disney, and then an entire bunch of different gamers. Is this going to work out?

Matt Frankel: I imply, my quick reply is sure, with an enormous asterisk on it. I imply, this immediately makes the mixed firm a serious participant, for positive. It provides the mixed HBO Max and Paramount Plus providers a bit greater than 200 million subs. It’s primarily tied with Disney plus, when you think about the Hulu and ESPN+ subscribers, as effectively. And in the case of display time, the mixed firm is definitely the moment quantity two. Only YouTube has extra watch hours than the mixed firm. They’re manner forward of Disney, manner forward of Netflix even.

Travis Hoium: Oh, actually however that should embrace cable, too and linear TV.

Matt Frankel: Yes, that features all their linear stuff as effectively. But it contains Disney’s linear as effectively. It’s a reasonably spectacular mixture. They have a reasonably stacked content material library. In my opinion, a sports activities library that even Netflix could not contact proper now. Of the three you talked about, Netflix appears probably the most disruptible by this deal, however you talked about the debt. And once you say, can they thrive? Can they win? That all will depend on value financial savings and with the ability to finally pay again that debt. They wish to obtain $6 billion of value financial savings in three years. David Ellison had stated that is not going to come back from job cuts, so the place is it going to come back from? So debt-fueled mergers have a nasty monitor report within the media house. Think of when AT&T purchased DirecTV, for instance. They do not have an excellent monitor report. Yes, they may very well be a hit right here. It immediately makes them a contender, nevertheless it’s not a given.

Travis Hoium: Lou, not solely do they not have a great monitor report taking over this a lot debt, but additionally this firm, Time Warner has a protracted monitor report of form of odd and arguably failed mergers.

Lou Whiteman: Let’s recreation plan this out. Let’s attempt and work out how they win right here, proper? Consumer value. There’s a variety of discuss bundling HBO Max and Paramount Plus or bundling the non premium providers. But they want money to service that debt. That debt is the most important factor. If you are bringing down the associated fee versus having the 2 standalones. That solely works should you considerably develop the pie. I’m not satisfied proper now that there are lots of people that will have HBO Max if solely it was a buck cheaper. I do not know should you can considerably develop the pie by simply bundling right here, which makes me skeptical about their potential to bundle. Look, I do assume that it is a fairly highly effective group of belongings within the streaming world, if they’ll survive the preliminary stage, if they’ll pay down the debt and go from treading water to truly investing within the enterprise. But within the close to time period, I do not assume the panorama has modified that a lot as a result of I do not assume on the income facet, they are going to have the ability to bundle and do synergies the way in which they’d like. And on the associated fee facet, like Matt says, if they are not going to take out jobs, possibly rather less server house mixed. I do not know the place that is coming from.

Travis Hoium: Lou, do you assume that there is a risk that this bundle would really make it engaging sufficient for these of us who possibly do not pay for Paramount or HBO Max, no matter they’re calling that proper now, by the way in which, that naming configuration, they have to determine that out. But is it doable that they can say, what, if we put each of these items collectively, put all of our belongings in a single for $15 a month, that is going to be an even bigger pie general than two of those providers separate for, for example, $10 a month. I’m not getting fairly the subscription numbers appropriate, however having extra folks paying even a bit bit lower than the sticker value for the person providers may very well be a great factor, and possibly you do not have as a lot churn.

Lou Whiteman: Maybe. But once more I’m assuming right here that the first purpose goes to be to service that debt. And you want a variety of extra subscriptions to make that simply break even or advantageous to you from simply money coming in perspective. Yeah, possibly over time, however once more, proper now, does it serve their greatest have to bundle these items? I believe there is a danger there. You might find yourself with simply much less income in case you have somebody paying 20 proper now going to fifteen. It’s all about simply how once more, Travis, how many individuals on the market do you assume are similar to, man, I do not know if I can justify $10 apiece for these, however man, if I can get each of them for 15, that is a deal. I’m positive there’s some on the market. I simply do not know if it is sufficient to actually transfer the needle.

Travis Hoium: Yeah. You’re proper. I do not know precisely what the incremental variety of folks is. The different factor is that they have achieved some bundles. These corporations have achieved some bundles up to now. The bundle that I’m on is thru Disney, nevertheless it contains HBO Max, so I do not know. Am I going to get that taken away, and then am I going to re-sign up for the Paramount Max? It’s all going to be very difficult, which appears to be the development for streaming normally. When we come again, we’ll speak in regards to the potential winners exterior of Paramount in Warner Bros. Discovery. We’ll be again in a second.

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Travis Hoium: Welcome again to the present. I needed to speak about who the potential winners are on this streaming panorama as we’ve got some extra consolidation occurring. And Lou, there’s a variety of shifting items right here, however you now appear to have 4, possibly 5 energy gamers available in the market. Who’s going to in the end be the winner? Is it going to be a kind of corporations goes to be one of many corporations that is now specializing in promoting content material? Where does your thoughts go once you’re on the lookout for alternatives both in streaming or adjoining to streaming?

Lou Whiteman: We’ve acquired to do the gold star, the massive winner from this deal is David Zaslov and the remainder of the Warner Brothers government crew. Look, that they had a shedding hand. They did not know what to do. Now instantly they and their shareholders get a pleasant premium, and I believe administration will get an $800 million payout. If there’s a huge winner from this deal, it’s a administration crew going from guys, I do not know if that is understanding to Eureka, give him credit score there. Look, so far as the general winners, I do not know if I see an actual change within the panorama right here. I believe there’s just a few, and Matt listed out within the notes. I’m not going to steal what he stated, look, I believe that is the established order till or until Paramount can get its toes on stable floor with the debt and then see what they’ll do from there.

Travis Hoium: Matt, who do you assume in the end wins right here?

Matt Frankel: I imply, I believe film theaters are going to finish up being the most important winner from this deal particularly, and it isn’t even that shut. The settlement that allowed the deal to shut requires a minimum of 30 theatrical releases from Warner’s a yr or from the mixed firm, no matter, for the primary two years and 32 a yr for the following three; it locks in a 45-day theatrical exclusivity window, which has been the most important concern with movie show disruption that every one that was going to go away. Not positive that will have occurred if Netflix had purchased it. That’s an enormous deal for the movie show enterprise.

Travis Hoium: What in regards to the content material? A few the names that I maintain fascinated with is TKO so owns the UFC. They did make the massive take care of Paramount. It looks as if these sort of stay rights are actually have corporations which might be going to in the end be determined for these stay rights, the NFL, one other one. They can decide out of a few of their deal within the subsequent couple of years, probably renegotiate that. Now you have acquired corporations ESPN, which the NFL has a stake in. They want that content material. CBS, Paramount, this conglomerate wants that content material. Netflix arguably wants that content material. Is that stay sports activities going to be simply even larger bidding struggle now?

Matt Frankel: Well, it is powerful to say if the stay sports activities are going to be winners right here. Think of the NFL, for instance. You’re appropriate. They can renegotiate their rights after the 2029 season in a variety of circumstances. It now has a stronger associate that it is aware of has deeper pockets in CBS, which is now owned by the mixed firm. But then again consolidation may not be the most effective factor and not simply the NFL, for all these sports activities leagues. Two of the key bidders for stay sports activities, CBS and TNT are actually mixed beneath one firm. That means much less competitors. It’s difficult to say, I believe it is a elevate for the stay sports activities leagues, nevertheless it’s not the huge windfall that it may appear once you get consolidation as a result of, sure, a variety of corporations want this content material, however there are fewer that they’ll make pay up for it now.

Lou Whiteman: And look, stay sports activities, I agree everybody together with Netflix wants stay sports activities. I do not know if all of them want the excessive, all of them have to get in bidding wars. TNT arguably was the one sort of driving bidding wars in a few of these, so to the extent that now they’re constrained, once more, say it once more.

Travis Hoium: They backed out of the NBA, yeah.

Lou Whiteman: The debt. I do not know if that is nice, however look, Netflix, does it make sense for Netflix to pay up for the NFL? I do not know if long run they’re going to assume that. I do assume, sure, they want stay sports activities. But Netflix is the service everyone has anyway. They do not get a variety of incremental income out of I imply, I suppose they get advert income, however once more, that is not sufficient to justify simply silly bidding. I believe they’re in stay sports activities to be sure that they continue to be related and folks stick with them, however that’s not simply getting folks to remain, that is a defensive transfer. That’s not including income. I do assume that, sure, stay content material and causes to remain month to month and simply set it and neglect it versus simply sort of with AppleTV, we have considered, OK, we’ll join a month binge and get off and not do this. I do assume there’s one thing to that. I do not know if essentially these marquee belongings are going to seek out bidding wars with everyone concerned simply because everyone wants one thing stay.

Travis Hoium: Well, it should be fascinating to see too who finally ends up being so weak that they cannot get in these bidding wars, we’ll discuss a few of these potential losers once we come again. All proper, we talked about a number of the winners probably from this merger that occurred. Let’s discuss what the potential losers are, Matt. And this looks as if an space the place we have had sufficient consolidation that you just sort of know who the facility gamers are, however who’re the businesses that simply do not have that energy anymore?

Matt Frankel: The apparent instance is Peacock, and I’m not saying they seem to be a loser due to this. They’re only a shedding streaming service normally. And not simply shedding is in they are not profitable. They’re shedding cash. They have 46 million paid subscribers, lower than 1 / 4 of both the Disney bundle or this new mixed firm. They’ve misplaced over $10 billion complete since they began, and now its opponents are even larger and extra highly effective than ever earlier than. My opinion is that Peacock ought to both promote themselves or discover any individual to associate with. I imply, their greatest transfer at this level is a three way partnership or sale. That’s actually the one manner I see them.

Travis Hoium: Who might probably do this? Is it Disney? Is it Netflix?

Matt Frankel: Well, it may very well be piece by piece. There may very well be some form of okay, we’ll eliminate this asset, however we’ll carry on Peacock, as a result of they do personal the NBC, linear Network. There are a variety of corporations that would afford it. Netflix might afford it. Disney might afford it. It’s only a matter of it with the ability to get by the regulatory course of and what that may appear to be. And it isn’t only a sale, a partnership might work as effectively. We’ve seen Disney associate with sure corporations earlier than that they do not personal, and it is labored out advantageously for each.

Travis Hoium: Yeah, do not forget that Universal Studios, parks are additionally a part of that. I might be shocked if Netflix would not become involved if there finally ends up being some bidding for NBC. But Lou, who do you assume comes out weaker right here?

Lou Whiteman: I believe Netflix comes out weaker, and everybody factors to the breakup charge. That’s nice. Cash is ok, however they had been in and continued to be within the hunt for IP. They might actually use that. I do not understand how a lot that 2.8 billion or no matter it’s in money goes to provide them versus the libraries and simply a budget content material that I believe they’re all striving for proper now. We’re not having to take a position. Peacock, look, the true query right here is, is that it took a variety of finagling simply to get additionally two RNs. Merged. I do not know if there’s anybody who has the cash to purchase Peacock that regulators would permit to purchase Peacock. It’s onerous to think about Disney with ABC already attending to take a crack at that. Netflix continues to be form of the boogeyman. I imply, I’ll let you know what I’d prefer to see occur right here. I believe that Netflix and Peacock will work out some form of aggregation deal the place they sort of work collectively in need of a merger. I believe that makes a variety of sense.

Travis Hoium: So possibly even shut down the Peacock streaming service and simply say, what, Netflix, we’ll simply promote you all of our content material.

Lou Whiteman: Or some technique to income share and add the Peacock content material to Netflix whereas it is simply one thing in need of a merger the place they’re working collectively and aligned. I nonetheless, and that is simply me out right here dying on a hill, however I believe the last word transfer right here to get a bonus is Disney taking its studio and streaming enterprise, all the non-experiences, merging it with Netflix, with Disney retaining a stake, retaining the IP, persevering with to develop the IP. But for Disney to simply get out of the low margin slash we will not make this work enterprise that they’ve struggled. They’ve been shifting cups round. There’s nonetheless no ball beneath them. Turn them into the half that works, the expertise. Let Netflix run that IP with Disney, I do not know, proudly owning if it is Reverse Morris Trust or one thing, they may simply retain a 25% stake. That is the successful hand. I do not know if I might have the braveness to do it if I used to be one in all these CEOs, so I doubt it will occur. But I do assume that that’s the checkmate transfer out right here.

Travis Hoium: Lou goes to be on this interest horse for some time. As a dad or mum who will get selections over what my children get to observe, Disney going away could be terrible as a result of that’s the one.

Lou Whiteman: Why would it not go away, although?

Travis Hoium: Well, if it was folded into Netflix. Netflix simply would not have the parental controls, the standard.

Lou Whiteman: But we simply talked about this. WBD and Paramount is unlikely simply to mix all of their belongings in a single. Netflix could be loopy to say, yeah, we’re simply going to close down this children model. There’s a variety of methods to make this work. I believe for Netflix, it is the IP, it is all the manufacturing. It’s simply the ready-made stuff. And for Disney, let’s proceed to profit from this, however deal with the elements of the enterprise which have labored for the final decade, which is, once more, experiences, cruise ships, issues like that. Why not simply be within the a part of the enterprise that makes cash? Why is that loopy for Disney?

Travis Hoium: It’s possibly not loopy. Maybe not the consumer expertise that oldsters need. That’s my solely pushback right here. If you will have ideas about what these corporations needs to be doing, who needs to be merging with who ship us an e mail at [email protected].

As at all times, folks on this system could have curiosity within the shares they discuss and the Motley Fool could have formal suggestions for or in opposition to, so do not buy or promote shares primarily based solely on what you hear. All private finance content material follows The Motley Fool’s editorial requirements, and it isn’t accredited by advertisers. Advertisements are sponsored content material and offered for informational functions solely. To see our full promoting disclosure, please try our present notes. For Lou Whitman, Matt Frankel, and Dan Boyd behind the glass, I’m Travis Hoium. Thanks for listening. We’ll see you right here tomorrow.