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Analyst thinks Warner Bros Discovery should buy Paramount

Senior analyst Laura Martin with Needham cautioned mega mergers between large media companies was unlikely as long as Democratic lawmakers and commissioners are in power.

Senior analyst Laura Martin with Needham cautioned mega mergers between large media companies was unlikely as long as Democratic lawmakers and commissioners are in power.

The Roku Channel offers subscriptions to numerous third-party services, including Paramount Plus. (Graphic by The Desk)
The Paramount Plus tile is featured prominently on The Roku Channel, which offers premium subscriptions to third-party services. (Graphic by The Desk)

Paramount Global could be acquired by a larger entertainment business as media companies seek further consolidation to better compete in the industry, a financial analyst said on Monday.

Speaking on CNBC, Needham & Company’s senior media and Internet analyst Laura Martin said she continued to view Paramount as a “takeover candidate” that was too small to survive on its own — and she believes Warner Bros Discovery (WBD) could make a play for Paramount’s assets at some point in the near future.

“As Discovery winds its way through the Warner Bros. acquisition that it’s made and continues to cut costs rather formidably, I think it becomes more likely that asset buys Paramount,” Martin said during the television interview. “Paramount is just way too small — it just keeps getting smaller, and it needs to go away, because it is a fabulous asset. It needs to be part of a bigger bundle of offerings, and Warner Bros Discovery can give it that.”

Martin’s comments were followed up on Tuesday by an investor note written and published by Bank of America analyst Jessica Reif Ehrlich, who upgraded Paramount’s stock from “neutral” to “buy” on the belief that the company may sell some or all of its assets.

“It is our view that PARA has a unique collection of assets that would generate significant buyer interest if ever put up for sale-either in pieces or whole,” Reif Ehrlich wrote, referencing Paramount by its stock ticker symbol.

Reif Ehrlich pointed to an February story published by the Wall Street Journal that revealed Paramount had received several unsolicited offers from a former Showtime executive to acquire the multiplex cable network. Paramount turned down the offers, deciding instead to merge the Showtime brand with its premium streaming service, Paramount Plus.

Paramount has also entertained offers to acquire some or all of BET Media, which includes the streaming service BET Plus and several Black-focused cable television channels. After scrutinizing numerous potential deals, Paramount ultimately abandoned its plan to sell off BET Media, the Journal reported in August.

Despite those false starts, Martin believes Paramount is too small to survive on its own, and that it is just a matter of time before it is swallowed up by a larger player in the space who could leverage its film and television assets to better compete against tech firms like Netflix and Apple. She expressed similar thoughts while discussing the state of the Walt Disney Company’s business, affirming the “best outcome for Disney shareholders would be if Apple would buy them.”

But Martin cautioned that further media consolidation would almost certainly face opposition from regulators, so long as progressive lawmakers and commissioners are seated.

“Unfortunately, you sort of need a Republican administration in order to have a Republican DOJ, commissioner,” Martin said on CNBC. “Rght now, with a Democrat in the White House, you have a really difficult takeover [potential]…there’s no actual committee that would approve a takeover by Apple by anything or Amazon of anything, and those are the only companies big enough to buy the Walt Disney Company these days.”

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About the Author:

Matthew Keys

Matthew Keys is the publisher of The Desk and reports on the business and policy matters involving the broadcast television, streaming video and radio industries. He previously worked for Thomson Reuters, Disney-ABC, Tribune Broadcasting and McNaughton Newspapers. Matthew is based in Northern California, has won numerous awards in the field of journalism, and is a member of IRE (Investigative Reporters and Editors).