Paramount, Comcast, Netflix submit bids for Warner Bros. Discovery

Hollywood's biggest competition this year isn't at the box office, it's in the Warner Bros. Discovery board room. State of play: A trio of Hollywood power players submitted bids to buy all or part of WBD Thursday, launching what is sure to be a dramatic and historic media merger fight. Why it matters: In a hyper-competitive streaming environment, scale matters. And assets like WBD, which includes the nation's top-performing movie studio so far this year (Warner Bros. Pictures) and a prestige streamer (HBO Max), don't come up for grabs often. Driving the news: WBD's board set a Thursday deadline for takeover bids and received three different propositions, sources confirmed to Axios. Paramount, which already owns a top movie studio (Paramount Pictures), a major streamer (Paramount+), a broadcaster (CBS) and a slew of cable networks, has submitted a bid for all of WBD, including its cable channels like CNN and TBS. Netflix — which doesn't own a movie studio or TV networks, but has one of the largest subscription streaming bases in the world — submitted a bid solely for WBD's streaming and studio businesses. Comcast, which also owns a top movie studio in Universal, similarly is vying solely for WBD's streaming and studios businesses.Comcast currently owns a slew of cable networks including MS NOW and CNBC, but plans to spin them out into a separate publicly traded company early next year.Catch up quick: Before the deal talks, WBD's stock had languished amid a challenging environment for traditional media companies. Last month, the company said it would consider a sale while continuing to pursue a possible split that would separate its streaming and studio assets from its cable division. A split, the firm has argued, would create more shareholder value than keeping its assets together. It's now up to WBD's board to decide whether a takeover bid could drive even more shareholder value than a split. Follow the money: Paramount, which is currently valued at less than a third of WBD on the public markets, would need to raise money to support its bid.The company, as Axios has reported, submitted a cash and stock bid of $23.50 per share in October, offering a massive premium to WBD's pre-deal talk stock price. But WBD's board was looking for a price tag closer to $30 per share. Comcast would also need to raise debt to support its bid, but analysts feel confident it could raise cash, given its credit rating. Netflix, which is currently valued at $449 billion on the public market, likely wouldn't face financial challenges. WBD, Paramount, Netflix and Comcast did not comment. Reality check: While each bid presents its own unique regulatory challenges, WBD lawyers don't think any hurdles would be impossible to conquer in court should the Justice Department sue to block a deal. What's more likely is that WBD's board will have to weigh any time wasted on the possible regulatory setbacks of a particular bid against the its business value. Zoom in: President Trump is widely seen as favoring a Paramount bid over one by Comcast given his alliance with Larry Ellison, father of Paramount CEO and chair David Ellison, and his public disdain for Comcast boss Brian Roberts. The president could pressure the DOJ to sue to block a Comcast bid, but that doesn't mean the DOJ would win that fight in court.The DOJ famously lost its bid to block AT&T's acquisition of Time Warner in 2018, despite reported Trump pressure to block the deal.Paramount and Comcast both own major movie studios, and regulators could argue that the combination of Paramount Pictures or Universal with Warner Bros. Pictures would reduce competition. But that's a tough argument to make considering regulators approved a merger between Disney and Fox in 2019 that brought together two major studios. If regulators were to argue that the media market should be sized based on streaming subscriptions, Netflix — the largest subscription streamer globally — would be more vulnerable, but the DOJ would need to convince a judge that's the right way to evaluate a media market. The DOJ is unlikely to hang its case to block Paramount's deal based on the combination of its cable assets with WBD's, given cable is in terminal decline. The intrigue: Recent reports suggest Paramount has been in touch with Middle Eastern sovereign wealth funds to possibly raise money later to support its bid. Any foreign money used to support a bid could face scrutiny, but it's likely Paramount — or any bidder taking on foreign cash — would structure their bid to avoid crossing any foreign ownership threshold concerns. What's next: Sources told Axios that WBD's board is looking to make a decision about whether to accept a bid or continue its path to split by year's end, which would punt any regulatory approval processes to next year.

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