A $110 billion deal leaves about $79 billion in net debt and two streaming services slated to merge. Nobody has announced a price.
Paramount completed its takeover of Warner Bros. Discovery on 6 October, creating Skydance Corp. David Ellison is chairman and CEO, with Ynon Kreiz as co-CEO. The deal values Warner at about $110 billion (€97 billion) in enterprise terms, or $31 a share in cash. Skydance says its streaming services will “unify into a single service over time.”
No name, price, or launch date exists for the combined service. Meanwhile, the company carries about $79 billion (€69 billion) in net debt and a $6 billion (€5.3 billion) cost-cutting target. The debt and cost-cutting target will shape what subscribers pay next.
What’s Happening & Why It Matters
The Deal Closes
Paramount beat Netflix for Warner in February. Netflix declined to raise its bid after Warner’s board judged Paramount’s $31-a-share offer superior. Paramount paid the $2.8 billion (€2.5 billion) termination fee Warner owed Netflix. In March, Paramount said the US antitrust waiting period had expired.
The combined company joins CBS, MTV, and BET with Warner’s CNN, TNT, and Food Network, plus both film studios. The deal missed a 30 September deadline. Warner shareholders earned a $0.25-a-share quarterly ticking fee, measured daily, until closing.
The Debt Load
Paramount told analysts in March the combined company would carry about $79 billion in net debt at closing. Bank of America, Citigroup, and Apollo committed $54 billion (€47 billion) of debt financing. The Ellison family and RedBird Capital Partners backed $47 billion (€41 billion) of new equity. CNBC’s interviewer noted Fitch had downgraded Paramount to junk status.
Ellison said the company would be 4.3 times levered at close once $6 billion in synergies count. Company documents show net leverage of 6.5 times before synergies and 4.4 times after, according to Octus. Morgan Stanley estimates net debt of $77.2 billion (€68 billion) at the end of 2026. It forecasts $6.37 billion (€5.6 billion) of interest expense in 2027, per a summary of its note.
The Cost Target
Skydance targets more than $6 billion in annual savings within three years. The plan consolidates streaming technology stacks, cloud providers, real estate, and corporate overhead. Morgan Stanley puts the target near 11% of operating expenses and expects layoffs in overlapping corporate and marketing roles.
Ellison and Kreiz told staff in a memo that layoffs are coming, Variety reports, without giving a number. A Los Angeles County report in August estimated the merger could cost some 4,500 film and TV jobs in the county over three years. RedBird’s Gerry Cardinale called the notion that $6 billion in savings means mass firings “completely antiquated.”
The Streaming Plan
Ellison said HBO Max and Paramount+ will run as separate but bundled services at first. “Long-term, the plan is basically to bring them together,” he said at the closing event on the Paramount lot. Deadline reports that Skydance has already merged the tech stacks of Paramount+, BET+, and Pluto TV. It named HBO chief Casey Bloys co-chair and chief content officer of its direct-to-consumer unit, and Ellison says HBO will “operate with independence.”
Paramount+ had 81.6 million subscribers at the end of the second quarter. Ellison puts the combined base at a little over 200 million. About 40% of HBO Max’s global subscribers were on the ad-supported tier, up 11 percentage points in a year.
Pressure on Prices
No price has been announced, but the pressure points up. Interest on $77 billion of debt is a fixed cost. Octus flags possible dis-synergies from merging platforms with heavy customer overlap, along with higher sports rights payments. The Hollywood Reporter expects streaming prices to keep rising, and Engadget sees a good chance the unified service costs more than either does today.
Competition pulls the other way. Morgan Stanley says the merged service could rival Disney and Amazon for second and third place behind Netflix, which means winning subscribers. Someone holding both apps pays about $370 (€325) a year for the top tiers: $230 (€202) for HBO Max Premium and $140 (€123) for Paramount+ Premium with Showtime, per Stuff. A single bundle could cost less than that sum. It could still cost more than either service alone.
Subscribers have seen cost pressure elsewhere. Xbox capped cloud streaming at 15 hours a month, as TF covered in Xbox Caps Game Pass Cloud Streaming at 15 Hrs/Mo.
TF Summary: What’s Next
Skydance hasn’t named the combined service, set a price, or given a launch date. Subscribers keep separate HBO Max and Paramount+ apps during a short-term bundling phase. Layoffs follow, and the company hasn’t disclosed the number. Morgan Stanley expects net debt to ease to about $75 billion (€66 billion) in 2027.
MY FORECAST: Expect the first combined price to undercut the $370 (€325) a year that people pay today for both services. It will still exceed what either service charges alone. Expect ad-free tiers to rise within a year of launch, because interest costs leave little room to discount. Watch the $6.37 billion (€5.6 billion) interest bill Morgan Stanley forecasts for 2027, which will set a price floor.
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