Warner Bros. Discovery 'in talks to merge with Paramount Global' after billionaire media mogul Shair Redstone announced a sale of the company

Warner Bros Discovery and Paramount Global are initially in talks to merge, in a deal that would profoundly change the news and entertainment industry.

The conversations, first reported by Axiostook place over lunch Tuesday between the bosses of the two behemoths, at Paramount's global headquarters in New York's Times Square.

The potential merger has already got analysts talking because it would create an entertainment and news giant that could cause a stir among smaller, still-huge media companies, including the likes of Netflix, Apple and Amazon.

These companies are currently competing for a finite number of subscribers — and the entity that could create the nearly $40 billion deal could prove to be troublesome.

Warner currently owns the Max streaming service, which would be merged with Paramount Plus if a deal were struck. Furthermore, CBS News could also combine with CNN, essentially creating a global news giant.

The conversations, first reported by Axios, took place during a Tuesday lunch between the two behemoths' bosses at Paramount's global headquarters in New York City's Times Square.

Warner CEO David Zaslav and Paramount boss Bob Bakish discussed the deal that is likely to improve profitability amid the now years-long 'streaming war' with Netflix.

The conflict has cost both companies – and other Hollywood giants such as Disney and NBCUniversal – billions.

However, it still continues, prompting companies like Warner and Paramount to continue ongoing cost-cutting missions as they try to offset the money funneled into their video streaming services.

Meanwhile, Netflix remains the most popular streaming service in the world – a distinction it has held for more than a decade.

The company — once a video rental service but now a full-fledged studio worth $214 billion — reported 247.15 million paid memberships worldwide as of September 30.

That number – up 10.8 percent from the previous quarter and up nearly 11 percent for the year – is astronomical compared to the number of subscribers to Warner Bros' HBO, Max and Discovery+ now in total, due at the end of 2022 had 96.1 million subscribers.

Meanwhile, Paramount Plus — thanks to shows like Yellowstone — recently earned a record high of 63 million subscribers during the third quarter, more than analysts expected but still far behind Netflix.

Together, however, the contrast becomes much less negligible, with a difference of about 90 million subscribers.

Warner CEO David Zaslav discussed the deal that is likely to improve profitability amid his company's now years-long “streaming war” with Netflix. He will be seen on stage at the New York Times Dealbook Summit on November 29 in New York City

Bob Bakish, president and CEO of the Paramount Group, hosted the luncheon, as both companies are engaged in cost-cutting missions to support their streaming services

However, Netflix remains the streaming giant, with more than double the number of subscribers of both companies' services combined. Under the leadership of CEO Ted Sarandos, Netflix is ​​worth approximately $214 billion

Warner, which currently has a market cap of $28 billion, currently owns the streaming service Max, which would be merged with Paramount Plus if a deal were to be struck. Both services have racked up around 160 million subscribers – still less than Netflix's 247 million

Such a difference would certainly be a lot less intimidating, especially considering the large debt loads both companies have accumulated recently.

Warner's net debt was $43 billion as of September, while Paramount's was $14 billion, according to Wall Street firm Bernstein Research.

As it stands, both would be difficult to pay off; Paramount's net debt is 6.1 times earnings before interest, taxes, depreciation, and amortization, and Warner's is 4.1 times.

Warner's credit losses stem in large part from its own merger with Discovery last year, a combination that not only proved chaotic but also involved layoffs and cuts in content spending.

The company, which ended the first quarter with $49.5 billion in debt, is slowly paying it down, but the formation of a new national media conglomerate could speed up that process if it creates more customers and advertisers.

At least that is Zaslav's position.

Paramount is actually controlled by Shari Redstone, the heir to the Viacom throne and daughter of Sumner Redstone, who died in 2020

In 1994, Sumner – seen here with Shari in 2012 – realized his dream of becoming a Hollywood player with Viacom's $10 billion purchase of Paramount Pictures, a maneuver that has since grown into one of the largest media empires in the province.

He has reportedly been heavily involved in discussions in recent months to secure additional resources to expand Warner Bros. content. to boost Discovery, after doing the same over a number of years during his time at Discovery.