The Warner Bros. Discovery has joined the ranks of companies expressing interest in a possible merger with Paramount, according to two people with knowledge of the discussions.
David Zaslav, the chief executive of Warner Bros. Discovery, had lunch this week with Bob Bakish, Paramount’s chief executive, and expressed interest in a potential merger of the two companies, the two people said.
During the lunch, held Tuesday at Paramount’s Midtown Manhattan headquarters, the prospect of a merger emerged in a wide-ranging conversation between Mr. Bakish and Mr. Zaslav, people said.
The stock of Warner Bros. Discovery fell on the news of the deal, which was reported earlier by Axios. Paramount stock fell slightly in after-market trading.
Shari Redstone, who controls Paramount through her stake in its parent company, National Amusements, recently indicated a willingness to part ways with her family’s media empire. In recent weeks, National Amusements has held talks about selling its controlling stake in Skydance, the movie studio with production credits on Paramount franchises like “Top Gun” and “Mission: Impossible.”
There’s enough business logic to a Warner Bros. tie-in. Discovery and Paramount. Paramount’s bundle of TV networks, which includes MTV, Nickelodeon and Comedy Central, could give Warner Bros. more leverage. Discovery in negotiations with cable distributors such as Comcast and Charter.
Companies can also save costs in producing and marketing shows and movies on their networks and from their movie studios. And Paramount’s CBS broadcast network will give Warner Bros. Discovery, which operates NBA TV, another platform for broadcasting National Basketball Association games, was a selling point in its negotiations with the league over rights renewal.
But there will be significant obstacles to any deal. Although Warner Bros. paid Much of the leverage it gained as a result of a 2021 deal to merge Discovery with AT&T’s WarnerMedia, the company is still saddled with more than $40 billion in debt. And it remains to be seen whether the arcane tax laws will allow Warner Bros. Discovery to do a deal before the two-year anniversary of the completion of the merger, which is in April.
A deal for Paramount, if it materializes, could spark further consolidation among the media companies, which have banded together for heat in recent years as the dying embers of the TV business burn. Although TV companies like Paramount and Warner Bros. Discovery has been bankrolled by cash from cable distributors for decades, the pay-TV ecosystem increasingly shaky as viewers cut the cord in droves.
Other than Netflix, most streaming services aren’t much better. Traditional TV programmers like Warner Bros. Discovery and Paramount have invested billions of dollars in streaming services like Max and Paramount+, but they have failed to replicate cable TV’s cash-rich business model.
The relationship of Ms. Redstone to Mr. Zaslav will be a factor in the outcome of the negotiations. The two are well known in the clubby world of media executives and share many powerful friends, including the owner of the New England Patriots, Robert Kraft.
