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 discuss:

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

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A full transcript is below.

This podcast was recorded on Oct. 6, 2026.

Travis Hoium: The streaming wars just took another big turn. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I'm Travis Hoium. I'm joined today by Lou Whiteman and Matt Frankel, guys, the big news for the day is that Paramount has officially closed its merger or acquisition of Warner Brothers Discovery, $110 billion deal for context, that's about half the value of Disney, but they don't have the Parks, which is the profit driver of Disney. Matt, when you look at this deal, also $80 billion worth of debt, which seems like a notable amount of money. When you look at this deal and all the competition that's happening in the streaming space, everybody's raising their prices. Does this merger, does this new company have a chance to thrive in a world where you have YouTube with actually the number one market share in streaming? You have Netflix, there's Disney, and then a whole bunch of other players. Is this going to work out?

Matt Frankel: I mean, my short answer is yes, with a big asterisk on it. I mean, this instantly makes the combined company a major player, for sure. It gives the combined HBO Max and Paramount Plus services a little more than 200 million subs. It's essentially tied with Disney plus, when you consider the Hulu and ESPN+ subscribers, as well. And when it comes to screen time, the combined company is actually the instant number two. Only YouTube has more watch hours than the combined company. They're way ahead of Disney, way ahead of Netflix even.

Travis Hoium: Oh, really but that must include cable, too and linear TV.

Matt Frankel: Yes, that includes all their linear stuff as well. But it includes Disney's linear as well. It's a pretty impressive combination. They have a pretty stacked content library. In my opinion, a sports library that even Netflix couldn't touch right now. Of the three you mentioned, Netflix looks the most disruptible by this deal, but you mentioned the debt. And when you say, can they thrive? Can they win? That all depends on cost savings and being able to eventually pay back that debt. They want to achieve $6 billion of cost savings in three years. David Ellison had said that's not going to come from job cuts, so where is it going to come from? So debt-fueled mergers have a bad track record in the media space. Think of when AT&T bought DirecTV, for example. They don't have a great track record. Yes, they could be a success here. It instantly makes them a contender, but it's not a given.

Travis Hoium: Lou, not only do they not have a good track record taking on this much debt, but also this company, Time Warner has a long track record of sort of odd and arguably failed mergers.

Lou Whiteman: Let's game plan this out. Let's try and figure out how they win here, right? Consumer price. There's a lot of talk about bundling HBO Max and Paramount Plus or bundling the non premium services. But they need cash to service that debt. That debt is the biggest thing. If you're bringing down the cost versus having the two standalones. That only works if you substantially grow the pie. I am not convinced right now that there are a lot of people that would have HBO Max if only it was a buck cheaper. I don't know if you can substantially grow the pie by just bundling here, which makes me skeptical about their ability to bundle. Look, I do think that this is a pretty powerful group of assets in the streaming world, if they can survive the initial stage, if they can pay down the debt and go from treading water to actually investing in the business. But in the near term, I don't think the landscape has changed that much because I don't think on the revenue side, they're going to be able to bundle and do synergies the way they'd like. And on the cost side, like Matt says, if they're not going to take out jobs, maybe a little less server space combined. I don't know where that's coming from.

Travis Hoium: Lou, do you think that there's a possibility that this bundle would actually make it attractive enough for those of us who maybe don't pay for Paramount or HBO Max, whatever they're calling that right now, by the way, that naming configuration, they've got to figure that out. But is it possible that they are able to say, you know what, if we put both of these things together, put all of our assets in one for $15 a month, that's going to be a bigger pie overall than two of these services separate for, let's say, $10 a month. I'm not getting quite the subscription numbers correct, but having more people paying even a little bit less than the sticker price for the individual services could be a good thing, and maybe you don't have as much churn.

Lou Whiteman: Maybe. But again I am assuming here that the primary goal is going to be to service that debt. And you need a lot of additional subscriptions to make that just break even or advantageous to you from just cash coming in perspective. Yeah, maybe over time, but again, right now, does it serve their biggest need to bundle these things? I think there's a risk there. You could end up with just less revenue if you have someone paying 20 right now going to 15. It's all about just how again, Travis, how many people out there do you think are just like, man, I don't know if I can justify $10 apiece for these, but man, if I can get both of them for 15, that's a deal. I'm sure there's some out there. I just don't know if it's enough to really move the needle.

Travis Hoium: Yeah. You're right. I don't know exactly what the incremental number of people is. The other thing is they have done some bundles. These companies have done some bundles in the past. The bundle that I'm on is through Disney, but it includes HBO Max, so I don't 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 complicated, which seems to be the trend for streaming in general. When we come back, we're going to talk about the potential winners outside of Paramount in Warner Bros. Discovery. We'll be back in a moment.

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Travis Hoium: Welcome back to the show. I wanted to talk about who the potential winners are in this streaming landscape as we have some more consolidation happening. And Lou, there's a lot of moving pieces here, but you now seem to have four, maybe five power players in the market. Who's going to ultimately be the winner? Is it going to be one of those companies is going to be one of the companies that's now focusing on selling content? Where does your mind go when you're looking for opportunities either in streaming or adjacent to streaming?

Lou Whiteman: We've got to do the gold star, the big winner from this deal is David Zaslov and the rest of the Warner Brothers executive team. Look, they had a losing hand. They didn't know what to do. Now suddenly they and their shareholders get a nice premium, and I think management gets an $800 million payout. If there is a big winner from this deal, it is a management team going from guys, I don't know if this is working out to Eureka, give him credit there. Look, as far as the overall winners, I don't know if I see a real change in the landscape here. I think there's a few, and Matt listed out in the notes. I'm not going to steal what he said, look, I think this is the status quo until or unless Paramount can get its feet on solid ground with the debt and then see what they can do from there.

Travis Hoium: Matt, who do you think ultimately wins here?

Matt Frankel: I mean, I think movie theaters are going to end up being the biggest winner from this deal specifically, and it's not even that close. The settlement that allowed the deal to close requires at least 30 theatrical releases from Warner's a year or from the combined company, whatever, for the first two years and 32 a year for the next three; it locks in a 45-day theatrical exclusivity window, which has been the biggest fear with movie theater disruption that all that was going to go away. Not sure that would have happened if Netflix had bought it. That's a big deal for the movie theater business.

Travis Hoium: What about the content? A couple of the names that I keep thinking about is TKO so owns the UFC. They did make the big deal with Paramount. It seems like those kind of live rights are now have companies that are going to ultimately be desperate for these live rights, the NFL, another one. They can opt out of some of their deal in the next couple of years, potentially renegotiate that. Now you've got companies ESPN, which the NFL has a stake in. They need that content. CBS, Paramount, this conglomerate needs that content. Netflix arguably needs that content. Is that live sports going to be just even bigger bidding war now?

Matt Frankel: Well, it's tough to say if the live sports are going to be winners here. Think of the NFL, for example. You're correct. They can renegotiate their rights after the 2029 season in a lot of cases. It now has a stronger partner that it knows has deeper pockets in CBS, which is now owned by the combined company. But on the other hand consolidation might not be the best thing and not just the NFL, for all these sports leagues. Two of the major bidders for live sports, CBS and TNT are now combined under one company. That means less competition. It's tricky to say, I think it's a lift for the live sports leagues, but it's not the massive windfall that it might seem when you get consolidation because, yes, a lot of companies need this content, but there are fewer that they can make pay up for it now.

Lou Whiteman: And look, live sports, I agree everyone including Netflix needs live sports. I don't know if they all need the high, they all need to get in bidding wars. TNT arguably was the one kind of driving bidding wars in some of these, so to the extent that now they're constrained, again, say it again.

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

Lou Whiteman: The debt. I don't know if that's great, but look, Netflix, does it make sense for Netflix to pay up for the NFL? I don't know if long term they'll think that. I do think, yes, they need live sports. But Netflix is the service everybody has anyway. They don't get a lot of incremental revenue out of I mean, I guess they get ad revenue, but again, that's not enough to justify just stupid bidding. I think they are in live sports to make sure that they remain relevant and people stay with them, but that is not just getting people to stay, that's a defensive move. That's not adding revenue. I do think that, yes, live content and reasons to stay month to month and just set it and forget it versus just kind of with AppleTV, we've thought about, OK, we'll sign up for a month binge and get off and not do that. I do think there's something to that. I don't know if necessarily these marquee assets are going to find bidding wars with everybody involved just because everybody needs something live.

Travis Hoium: Well, it's going to be interesting to see too who ends up being so weak that they can't get in those bidding wars, we'll talk about some of those potential losers when we come back. All right, we talked about some of the winners potentially from this merger that happened. Let's talk about what the potential losers are, Matt. And this seems like an area where we've had enough consolidation that you kind of know who the power players are, but who are the companies that just don't have that power anymore?

Matt Frankel: The obvious example is Peacock, and I'm not saying they're a loser because of this. They're just a losing streaming service in general. And not just losing is in they're not successful. They're losing money. They have 46 million paid subscribers, less than a quarter of either the Disney bundle or this new combined company. They've lost over $10 billion total since they started, and now its competitors are even bigger and more powerful than ever before. My opinion is that Peacock should either sell themselves or find somebody to partner with. I mean, their best move at this point is a joint venture or sale. That's really the only way I see them.

Travis Hoium: Who could potentially do that? Is it Disney? Is it Netflix?

Matt Frankel: Well, it could be piece by piece. There could be some sort of okay, we'll get rid of this asset, but we'll bring on Peacock, because they do own the NBC, linear Network. There are a lot of companies that could afford it. Netflix could afford it. Disney could afford it. It's just a matter of it being able to get through the regulatory process and what that might look like. And it's not just a sale, a partnership could work as well. We've seen Disney partner with certain companies before that they don't own, and it's worked out advantageously for both.

Travis Hoium: Yeah, don't forget that Universal Studios, parks are also part of that. I would be surprised if Netflix doesn't get involved if there ends up being some bidding for NBC. But Lou, who do you think comes out weaker here?

Lou Whiteman: I think Netflix comes out weaker, and everyone points to the breakup fee. That's great. Cash is fine, but they were in and continued to be in the hunt for IP. They could really use that. I don't know how much that 2.8 billion or whatever it is in cash is going to give them versus the libraries and just the cheap content that I think they're all striving for right now. We're not having to invest. Peacock, look, the real question here is, is that it took a lot of finagling just to get also two RNs. Merged. I don't know if there's anyone who has the money to buy Peacock that regulators would allow to buy Peacock. It's hard to imagine Disney with ABC already getting to take a crack at that. Netflix is still sort of the boogeyman. I mean, I'll tell you what I'd like to see happen here. I think that Netflix and Peacock will figure out some sort of aggregation deal where they kind of work together short of a merger. I think that makes a lot of sense.

Travis Hoium: So maybe even shut down the Peacock streaming service and just say, you know what, Netflix, we'll just sell you all of our content.

Lou Whiteman: Or some way to revenue share and add the Peacock content to Netflix while it's just something short of a merger where they are working together and aligned. I still, and this is just me out here dying on a hill, but I think the ultimate move here to get an advantage is Disney taking its studio and streaming business, all of the non-experiences, merging it with Netflix, with Disney retaining a stake, keeping the IP, continuing to grow the IP. But for Disney to just get out of the low margin slash we can't make this work business that they've struggled. They've been moving cups around. There's still no ball underneath them. Turn them into the part that works, the experience. Let Netflix run that IP with Disney, I don't know, owning if it's Reverse Morris Trust or something, they could easily retain a 25% stake. That is the winning hand. I don't know if I would have the courage to do it if I was one of these CEOs, so I doubt it'll happen. But I do think that that is the checkmate move out here.

Travis Hoium: Lou is going to be on this hobby horse for a while. As a parent who gets decisions over what my kids get to watch, Disney going away would be awful because that is the one.

Lou Whiteman: Why would it go away, though?

Travis Hoium: Well, if it was folded into Netflix. Netflix just doesn't have the parental controls, the quality.

Lou Whiteman: But we just talked about this. WBD and Paramount is unlikely just to combine all of their assets in one. Netflix would be crazy to say, yeah, we're just going to shut down this kids brand. There's a lot of ways to make this work. I think for Netflix, it's the IP, it's all of the production. It's just the ready-made stuff. And for Disney, let's continue to benefit from this, but focus on the parts of the business that have worked for the last decade, which is, again, experiences, cruise ships, things like that. Why not just be in the part of the business that makes money? Why is that crazy for Disney?

Travis Hoium: It's maybe not crazy. Maybe not the user experience that parents want. That's my only pushback here. If you have thoughts about what these companies should be doing, who should be merging with who send us an email at podcast@fool.com.

As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows The Motley Fool’s editorial standards, and it is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For Lou Whitman, Matt Frankel, and Dan Boyd behind the glass, I'm Travis Hoium. Thanks for listening. We'll see you here tomorrow.

Lou Whiteman has no position in any of the stocks mentioned. Matt Frankel, CFP® has positions in Walt Disney. Travis Hoium has positions in Alphabet and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Apple, Netflix, TKO Group Holdings, and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.