Too Big to Fail. Too Leveraged to Stand.

“Paramount buys Warner Bros for $111 billion ($31 per WBD share)” - the crowd cheered! “Hollywood is saved!” - movie fans rejoiced! “Netflix is shaking!” - journalists screamed. But is that really the case? Will this deal save Hollywood and movie theaters?

First of all, let’s take a look at the buyer. This glamorous gentleman goes by the name of Paramount Skydance. He recently swallowed Skydance Media for $8.4 billion (the merger closed on August 7, 2025), and now he’s worth $14 billion. Yes, yes, you heard that right, he’s worth $14 billion. And now he wants to buy Warner Bros for $111 billion. That means Paramount Skydance wants to acquire a company 7-8 times its own size. And it’s already carrying billions in debt from the previous acquisition.

What about Warner Bros? What a great buy! The goose that lays golden eggs. Well, you could have said that 20 years ago, but today it’s sitting on roughly $34 billion in gross debt. On top of that, the company includes a cable business that’s deeply unprofitable. When was the last time you signed up for cable? Exactly.

So where’s the money coming from? $57.5 billion from Bank of America, Citi, and Apollo, and the rest from esteemed friends in the Middle East, all backed by the good word of Larry Ellison (Oracle). And what do we get in the end? Combined debt of the merged company: $87-90+ billion and a credit rating that’s pure junk.

And all of this while the movie theater market is already not looking great, and it’s getting worse every year. Because, you know, audiences have changed. They need content at their fingertips (Netflix winks from the corner).

And how’s the defeated Netflix doing? Well, it doesn’t seem too upset. It pocketed $2.8 billion in breakup fees. Essentially, some papers were shuffled and lawyers did a bit of work so that US banks and esteemed friends from the Middle East handed them a nice chunk of cash.

There will be no winners in this story. There will only be one big loser - movie theaters. They will die in their current form. Netflix would have killed them through streaming, and Paramount Skydance will kill them through debt.