David Zaslav Talks “Whiplash-y” Paramount-WBD Merger: “If It Doesn’t Close, We Get $7 Billion, And We Get Back To Work”

Paramount-Skydance shocked the film industry yesterday by pulling ahead of Netflix with a “superior” bid to acquire Warner Bros. Discovery. Flash-forward to this AM, and WBD CEO David Zaslav, who was firmly against Paramount’s bid for months, held a town hall for employees, arguing the virtues of the merger. Sounds a bit like whiplash? Well, leaked quotes via Business Insider of the call have Zaslav saying that exact thing.

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“Together, we can be a great company,” Zaslav said of a potential Paramount-Warner Bros. merger on the town hall call this morning. “It’s not easy, but we’re getting bigger, and we’re getting stronger,” he said. “And you guys are the envy of everyone in this business.”

With Netflix now bowing out, the new deal in place has WBD selling its studio to Paramount for $30 per share, including a “ticking ree” of 25 cents per share, or ~$650 million, for every quarter that its proposed acquisition doesn’t close. The deal would see Paramount-Skydance acquire the entirety of WBD, including its cable TV networks like CNN. Netflix’s bid was for $27.75 per share.

That’s quite a turnaround after nearly three months of Netflix as the frontrunner, but Zaslav said Paramount’s updated offer “all happened very quickly.” “For even us, the speed — it feels a little whiplash-y,” he continued, and stressed that he and the WBD board of directors are still “getting our bearings.” WBD chief revenue and strategy officer Bruce Campbell also said Paramount “acted with determination” in pursuing the company, and WBD did a “thorough, rigorous strategic review process” to evaluate which deal on the table would bring shareholders the most value. In the end, Paramount won out.

The severe pivot comes as a surprise, especially after weeks of Zaslav sounding firmly against a deal between WBD and Paramount. Now he’s changed his tune, and welcomes the merger. “If Warner Bros. is going to survive, then we needed to be bigger, and we needed to be global,” said the CEO. Zaslav intimated that rival companies spurred the decision-making process, and that “some of these companies are getting so big that they can just run us over.” He no doubt has Alphabet in mind there. The parent company of YouTube made $402 billion in revenue last year, while WBD generated $37.3 billion; YouTube is currently the most-watched streaming service on US television.

Paramount gaining control of HBO Max and Discovery+ through WBD would help compete against YouTube in streaming. YouTube currently has a 12.5% share in the streaming market according to Nielsen, with Netflix at 8.8%. If the Paramount-WBD merger gets completed, then the 1.4% share of WBD’s streaming channels would combine with Paramount’s 2.3% share via Paramount+, Pluto TV, and BET+. HBO Max and Discovery+ combined for 131.6 million subscribers last quarter, while Paramount+ had 78.9 million.

As noted earlier, Paramount would also add WBD’s cable assets in the deal, including CNN, TNN, and HGTV. David Ellison already has CBS, MTV, and VH1 under the Paramount umbrella, and he’d no doubt like to restructure CNN in a similar way to his recent CBS overhaul, which saw Bari Weiss become editor-in-chief at CBS News last Fall.

But none of that will happen if the Parmount-WBD deal falls through, and that will happen if it doesn’t meet regulatory approval. That process takes an estimated 6-12 months, and its failure is something Zaslav anticipates. “If it doesn’t close, we get $7 billion, and we get back to work,” said the CEO. If plans for the merger fall through, Paramount will pay WBD a “breakup” fee, albeit one more expensive than the $2.8 million Netflix paid for their bid falling short.

As for an employee overhaul, including layoffs, or new heads for Warner Pictures and HBO, Zaslav had zero comment on that on the call. It’s all about the initial pivot to Paramount-Skydance right now, pending finalization. Talk of reorganization will have to wait until this new deal gets completed.

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