David Ellison spent two years attempting to acquire Paramount Global, ultimately finalizing the acquisition of this iconic Hollywood studio for $8 billion.

Now, the son of Oracle Corp. (ORCL) co-founder Larry Ellison has set his sights on a bigger target—Warner Bros. Discovery Inc. (WBD), valued at $71 billion. Given the turbulent state of the media industry in recent years, his newly formed Paramount Skydance Corp. will inevitably face a winding path to complete this deal.

The merger of the two companies would reduce the number of major traditional Hollywood studios to four while consolidating some of the biggest brands in news, film, and television, which will inevitably trigger regulatory scrutiny. Additionally, the deal will face obstacles in terms of funding, operations, and investors, and could even face intervention from President Donald Trump—who was frequently criticized by one of Paramount's programs this year.

"I'm not sure the government would approve this deal," said Raymond Sfeir, director of the Anderson Center for Economic Research at Chapman University Orange in California. "The media industry is already highly concentrated, and the merger would further increase concentration. Competition in streaming would decrease as a result, and reduced competition often leads to price increases over time."

The two companies overlap in multiple areas: film and television production, news, and cable television networks. Beyond its film studio, Paramount owns CBS News, MTV, and Nickelodeon; Warner Bros. is the parent company of HBO, CNN, and Cartoon Network, with its film studio being one of the largest in the industry.

Currently, both companies are undergoing major transformations aimed at delivering higher returns to investors. Paramount completed its merger with Ellison's Skydance Media at the end of last month and plans to lay off up to 2,000 employees.

Warner Bros. is about to split into two companies—one handling streaming and film production business, while the other manages cable networks like TNT. Whether merging with Paramount or other media companies, business integration (such as combining the two competing streaming services Paramount+ and HBO Max) would almost certainly result in thousands of job losses.

Warner Bros. CEO David Zaslav believes that once separated from the debt-laden cable network business, the valuation of its film production and streaming business will far exceed the current overall company valuation. He plans to complete the spin-off by April next year.

Ellison's proposed cash-heavy acquisition offer must be substantial enough to convince Zaslav to abandon the spin-off plan. Warner Bros. currently has an equity market capitalization of $40 billion (which increased by 29% on Thursday due to news of Ellison's potential acquisition interest); including net debt, the company's total valuation is approximately $71 billion. Earlier this year, the company's credit rating was downgraded to junk status.

"The deal terms must be significantly better than (Warner Bros.) expectations for the post-spin-off company valuation," KeyBanc analyst Brandon Nispel wrote in a research report.

Ellison has substantial financial resources. According to the Bloomberg Billionaires Index, his father is the world's second-richest person with a net worth of $363 billion, and the acquisition offer for Warner Bros. has the support of the Ellison family.

Creditors of both companies will also have a say.

This merger could lead to a downgrade of Paramount's credit rating, thereby increasing its borrowing costs. Research firm CreditSights noted Thursday that bond rating agencies are skeptical of the pay-TV industry, and Paramount's debt-to-earnings ratio is already higher than blue-chip companies.

If Fitch Ratings or Moody's Ratings downgrades Paramount by one notch, the company and its nearly $16 billion in debt would fall into junk territory.

For Warner Bros. bondholders, a major risk is that the deal could be announced and then ultimately rejected. Previously, Warner Bros. repurchased some bonds and canceled key protective clauses in other bonds in preparation for the spin-off, leaving many bondholders feeling abandoned. However, the company's bond prices rose Thursday.

Ellison may also face resistance from Zaslav. Zaslav previously served as CEO of Discovery Communications and led the merger of Discovery Communications and WarnerMedia in 2022. According to plans, after the cable network business is spun off, he will continue as Warner Bros. CEO, overseeing film production business and the HBO Max streaming platform.

CFRA Research industry and equity research director Kenneth Leon noted in an analyst report that Paramount may only be interested in part of Warner Bros.' business, not its cable network operations.

Leon wrote that Paramount might "believe the Discovery Global media portfolio cannot create significant value."

Both companies have been attacked by President Trump, who has indicated his willingness to use government power against those he sees as "enemies."

A year ago, Trump sued Paramount, alleging that CBS News tampered with interview content of then-Vice President Kamala Harris to make her appear more favorable, involving alleged election interference. In July this year, Trump reached a $16 million settlement with Paramount, with the new owners agreeing to reform CBS News, including hiring an ombudsman to review bias complaints.

Trump has also frequently referred to CNN as "Fake News CNN" and previously called it the "Clinton News Network."

Even if the deal ultimately goes through, Paramount would add Warner Bros.' troubles to its own list of problems. Last year, as more television viewers abandoned traditional cable TV for streaming, both companies wrote down billions of dollars in cable network assets.

Additionally, facing deep contraction in the film and television industry, both companies have already laid off thousands of employees.

According to industry tracker ProdPro, U.S. film and television production declined 35% last year from its 2022 peak, with a further 12% decline in the first half of 2025.