What Paramount, Comcast, Netflix could do with the assets

With more than a century of some of the most popular film and television content, it’s no wonder why Paramount Skydance, Comcast and Netflix are bidding for Warner Bros. Discovery’s assets.

Paramount made an initial offer in September to acquire Warner Bros. Discovery, leading WBD, which months earlier had announced plans to split itself into two companies, to officially explore a sale process.

WBD’s plans mirrored those of Comcast — separating out its cable networks from its movie properties and streaming service, HBO Max.

Its coveted library of content includes franchises like DC’s superheroes, Harry Potter, Lord of the Rings, Game of Thrones, Looney Tunes and Scooby-Doo. It is also the distributor of Legendary’s Dune franchise and Godzilla and King Kong films. The cable networks include CNN, TNT, TBS and TruTV, among others.

Warner Bros. Discovery aims to have its sale process wrapped up by mid-to-late December. Earlier this week the company received second-round bids from potential buyers, according to people familiar with the matter who declined to be named speaking about internal processes. As of Wednesday, Warner Bros. Discovery was still considering the offers and it remained unclear if there would be another round of bidding.

“All three candidates could potentially be beneficial, which is why Warner Bros. would be such an attractive acquisition,” said Shawn Robbins, director of analytics at Fandango and founder of Box Office Theory. “Potential isn’t enough, though. Resources, experience, and the proven ability to execute must be weighed.”

Here’s what each suitor could do with WBD assets.

Comcast is in the process of spinning out its portfolio of cable networks, which includes CNBC, but will retain broadcast network NBC, streaming service Peacock, the Universal film studio and theme parks.

Given its exit from the cable TV business, Comcast isn’t interested in Warner Bros. Discovery’s massive portfolio of networks. Therefore, Comcast’s offer includes a clause that would allow WBD to spin out its cable networks at any point before the proposed acquisition closes, CNBC previously reported.

Warner Bros. Discovery intellectual property would serve the most immediate boost to NBCUniversal’s Peacock. The streaming service is far behind its peers in terms of subscriber numbers, with just 41 million customers as of Sept. 30. The platform has bulked up heavily on sports programming but has been lacking on original content.

Outside of the superhero fare, WBD’s television content could strengthen NBCUniversal’s streaming service Peacock with programming like “IT: Welcome to Derry,” “The Pitt,” “The Last of Us” and a pair of shows from the Game of Thrones universe.

Adding Warner Bros. Discovery’s IP into the fold would allow Universal to bolster its number of popular franchises, pad its streaming service with television content and expand its theme park business.

“For Comcast, it would simply add to the depth of Universal’s current roster which already mixes a healthy balance of IP and more daring, often original, content,” Robbins said. “They check a lot of necessary boxes, without question.”

Universal already has a vast collection of franchise IP including Jurassic Park, Fast & Furious and Despicable Me as well as a suite of popular horror films.

“Comcast — they’ve got a pretty good film slate,” said Doug Creutz, senior media and entertainment analyst at TD Cowen. “They’re trying to sort of create Disney Prime piece by piece, and I guess having a superhero brand would be another step in that direction. I don’t know that it’s something that they particularly view as a strategic imperative. I think having more IP generally is something that, of course, you always would like.”

Warner Bros. Discovery’s DC Studios, now under the stewardship of James Gunn and Peter Safran, are set for a slew of theatrical releases as well as upcoming TV series. The pair’s first film, “Superman,” which released in July, tallied more than $600 million at the global box office and received positive reviews from critics.

On the slate is a Supergirl film, a Superman sequel, a second Batman film from Matt Reeves and a Clayface feature. On the television front, DC has plans for shows centered on the Green Lantern Corps; the origins of Wonder Woman’s island of Amazons; and some lesser known, but fan favorite comic book characters like Booster Gold.

Comcast and Warner Bros. Discovery already have some IP in common. The NBCUniversal parent licenses the rights to the Wizarding World for its theme parks. Having the film and television rights to Harry Potter would allow the company more control over production and how that translates into rides, experiences and merchandise.

“There are synergistic opportunities that you could turn over if you had authority over film and TV production, along with having the theme parks,” Creutz said.

Disney is the blueprint for this strategy. The company’s portfolio of intellectual property has been the bedrock of its theme parks since the first location opened its doors in 1955. Disney controls not only the production of content, but also how it’s curated in its themed experiences.

The most surprising bidder of the bunch, Netflix, has similarly been looking only at WBD’s streaming and studio assets.

After all, Netflix co-CEO Ted Sarandos reiterated during the company’s third-quarter earnings in October that the company has “no interest in owning legacy media networks.”

Initially, analysts and industry insiders speculated that Netflix’s interest in Warner Bros. Discovery was simply an effort to hike the price for its competitors who were eager to acquire WBD assets. But the streaming giant has made a bid of mostly cash, sources told CNBC, and remains a competitive bidder.

And the streaming giant could earnestly benefit from WBD’s content library.

As a relatively new player in the space — Netflix didn’t release original content until 2012 — it took the company time to build out its franchises. Because of that, Netflix didn’t even launch a merchandising division until 2019 and didn’t have an official online store until 2021.

Now, it has a handful of strong intellectual properties like “Stranger Things,” “KPop Demon Hunters,” “Bridgerton,” “Wednesday” and “Squid Games.” Like Comcast, having access to beloved franchises that have built-in audiences would be a big boon for Netflix.

Yet, industry experts are more interested in how the company would handle WBD assets that have traditionally been released in theaters.

“With Netflix, it’s less a question of how it could benefit them and more a deep concern of how they would handle the Warner Bros. legacy, particularly from a theatrical perspective,” said Robbins. “The money would certainly be there, yes, as would the initial exposure. But would their willingness be to behave more like a traditional movie studio than they have shown so far?”

Netflix has long opposed releasing films in theaters and only does so to stay in awards contention, to appease high-profile directors or to capitalize on buzzy titles. The streamer has always argued that its content is meant to be delivered to its subscribers through the Netflix platform and has limited how long its theatrical releases run in cinemas.

This strategy has allowed Netflix to avoid costly marketing campaigns, which are typically estimated to be about half of whatever is spent on the production budget. However, it also often puts the company at odds with theatrical partners. The company also does not share box-office data, something traditional movie studios provide.

“Many in the industry feel a Netflix purchase of Warner would be a death knell for some of the movie business’s most important aspects, properties, and long-held traditions,” Robbins said. “Netflix would need a significant turnabout face to even begin easing that sentiment.”

Netflix has told Warner Bros. Discovery management that it would honor contractual agreements to release movies in theaters if it secures a deal to acquire its assets, people familiar with the matter told CNBC.

Things are moving fast over at Paramount.

The company was recently merged with Skydance, and, in short order, its new CEO and chairman, David Ellison, has signed creative and C-suite talent, greenlit new franchises and struck a $7.7 billion deal for live UFC rights.

This strategy was laid out in an open letter from Ellison published in early August, in which he told investors that Paramount would invest in “high-quality storytelling and cutting-edge technology” to help “define the next era of entertainment.”

Ellison is hoping that the next era will include the acquisition of Warner Bros. Discovery — in its entirety.

“Paramount has struggled in recent years to capture the same kind of consistent, top-tier franchise output as some of their rivals,” Robbins said. “There’s a strong argument that absorbing Warner Bros.’ library would move the needle in a more material way pound for pound.”

Paramount has a suite of franchises like Star Trek, Transformers, Sonic the Hedgehog, Paw Patrol and SpongeBob SquarePants, but much of its theatrical success has been tied to one actor, in particular.

“Paramount’s by-far-most-important IP is a 63-year-old dude who does his own stunts,” Creutz said. “Maybe they are going to make an AI version of Tom Cruise and we’ll keep getting Tom Cruise movies for the next 100 years. But, the next thing down the ladder for them — it’s Star Trek.”

Before the Paramount-Skydance merger, the studio released around eight films annually, Ellison told investors in the company’s third-quarter earnings report in November. The new goal is to release at least 15 films theatrically in 2026.

So far, the slate for next year has about 10 titles, some produced solely by Paramount and some as part of the studio’s distribution deals. Most studios update their calendar throughout the year, especially as new independent features come up for sale during film festivals. Acquiring Warner Bros. Discovery and its theatrical slate would easily get Paramount past its goal.

However, Creutz noted that typically when studios merge, the number of films tends to decline in the years that follow.

“If Warner merges with any of these other companies, you are going to see some similar dynamic on the film side, you’re going to see a similar dynamic on the TV production side, and you’re probably going to see a similar dynamic in whatever they do with the streaming platform,” he said. “Presumably, in all three cases, there’s a merger of streaming platforms and that’s going to probably result in less content for consumers.”

Where Paramount diverges from the competing bids is that it wants all of WBD, including its cable networks. Of note, CNN would bolster Paramount’s news coverage, which already includes CBS, and the addition of TNT, TBS and TruTV would represent a big addition to the company’s sports coverage.

Live sports rights are scarce and only become available when previous deals expire. Apple has already emerged as the future home of Formula 1, and Major League Baseball is waiting until its deals expire after the 2028 season to reorganize its media packages. That means that Paramount will have few other top-shelf sports assets to bid on and acquire in the medium term.

Meanwhile, Warner Bros. Discovery has the rights to broadcast games from the National Hockey League, Major League Baseball and NCAA March Madness basketball along with the French Open and NASCAR.

Disclosure: Comcast is the parent company of NBCUniversal, which owns CNBC. Versant would become the new parent company of CNBC upon Comcast’s planned spinoff of Versant.

— CNBC’s Julia Boorstin, Lillian Rizzo and Alex Sherman contributed to this report.