Paramount-Warner Buys Theaters & DVD/Blu-ray Releases a Little More Time

The high-stakes gamble over Warner Bros. Discovery's new home may have finally reached a conclusion as Netflix folded and walked away leaving Warner and Paramount to reach a definitive agreement to merge on February 27, 2026. The cost to Paramount was an astonishing $100+ Billion. That’s a lot of money for one indebted Hollywood studio to spend on another, even more indebted studio. Reuters says that the combined debt of the new Paramount-Warner entity will be right around $79-billion in what could be the largest leveraged buyout in business history. Not even Warner Bro's own Gunnery Sargent Hartman (the late great R. Lee Ermey) knew they stacked debt that high! The debt is so high that Fitch credit rating agency reduced Paramount’s rating to “junk” status. All that debt was accumulated between two of the most prestigious American film studios when they were independent, reliant on revenues from a struggling movie business. David Ellison's studios may be tapped-out on borrowing, but like Amazon Prime video, Paramount has the backing of one of the largest cloud computing enterprises. Paramount-Skydance CEO David Ellison may have won the bidding war but his real gamble has only just begun.

Reactions to the buyout have been interesting as the internet sprang to life with pointed opinions. From prophecies of a politically right-wing takeover of media to approving high-fives among the “based” contingent, everyone seems to theorize that David Ellison will use his new mega-studio to advance politics. But as a significant donor to the Biden Democrat party, David is a little more politically ambiguous than his father Larry. It's seems more likely that David Ellison and the new Paramount-Warner entity will be more focused on a return on his significant investment. Since the Netflix, Warner, Paramount saga began we’ve come full circle, from “Netflix will be the end of cinema” to “Paramount will have too much power and influence in media.” Is it selfish of me just being happy that Warner’s buyer turned out to be the best possible option for continued theatrical and physical media releases?

Theatrical and DVD/BD Releases

Movie theaters and movie disc collectors surely dodged a bullet when Netflix backed away from negotiations. The #1 streaming movie platform is no friend to theaters or Blu-ray collectors. As recently as April 2025, months before the Warner agreement, Netflix CEO Ted Sarandos said he believed the traditional theatrical release model was outdated and “out of step with the consumer experience.” Don't get me wrong, I love streaming movies too and sometimes with Netflix. But Sarandos and Netflix co-founder Reed Hastings have an annoyingly paternalistic view on consumer choice. Hastings believes Netflix will be instrumental in transitioning us away from physical to exclusively digital media. Yes, Hastings says we'll eat our Soylent Green and like it! Netflix has been an ongoing bet that consumers prefer to watch internet-streamed movies at home and based on the decline of theaters and DVD sales, they seem to be right. We movie disc collectors are outliers hanging onto this hobby while we still can and Paramount's buyout of Warner may have bought us a little more time. But Netflix's goal to keep us at home streaming movies is a steep contrast to David Ellison’s stance. 

“We love the movies and entertainment business,” Ellison said. “We believe deeply in its future, and we want to help preserve and strengthen it. Movies are one of America’s greatest exports. We want to lean into that legacy, not diminish it.” “This transaction is about building more, not cutting back… More opportunity for the industry, more choice for consumers, more value for shareholders and more support for creative talent.” 

Ellison has reaffirmed his dedication to a 45-day theatrical window before releasing movies to home entertainment platforms, including VoD and physical media. That means that for now, we’re likely to see those excellent Warner 4K/Blu-ray transfers of both new and old films to continue into the foreseeable future. Warner has even been actively licensing films to high-quality physical media releases through boutique labels like Arrow Films and Criterion Collection. If Netflix had acquired Warner, the countdown to the end of any contractual obligations to release movies on disc would have begun with little hope of renewal. 

Warner Bros. is known for high quality 4K transfers of its classics. A practice Netflix would have surely ended.

Not a Done Deal Yet!

The Paramount-Warner merger still has to survive regulatory review, during which the Federal Trade Commission and the United States Department of Justice will consider streaming competition, cable concentration (including CNN), overall market power, monopolistic potential, and fairness to consumers. Many believe that given the Ellison family's close ties to the Trump administration, the merger is already in the bag.

Regulatory approval may not be an all or nothing proposition. They could demand asset divestitures, such as forcing Paramount to sell cable networks like CNN. Critics of the deal say that Ellison’s ownership of CBS makes the addition of CNN one step too close to a media monopoly. The fate of the cable news network remains a point of contention not only for the President, who has said he wants CNN sold as part of a Warner deal, but also for Democrat lawmakers and online pundits who fear handing it to Paramount could turn David Ellison into the next William Randolph Hearst. But, outside HBO and its massive streaming potential, ownership of the cable networks are a relatively insignificant part of the sale, despite the outsized attention CNN receives from pundits who, along with the President, are apparently the only ones still watching cable TV news.

Film Studios: From Large to MEGA 

Film studio consolidations are seldom a good thing for the movies. When mid-sized studios merge into larger entities, it can signal a retreat to safer productions, less risk and fewer movies overall. We've already seen the output of 20th Century Fox decline after the 2019 Disney merger. Consolidation means fewer studios pursuing unique visions in film, while visionary directors and producers are left with fewer options to get their movies made. But major studios merging into behemoths can also mean opportunity for smaller independent filmmakers to fill niches left by consolidating mega-studios. Most movie lovers would likely agree that they’d love to see Warner Bros. and Paramount remain separate, prosperous film studios. But that’s not the business landscape for movies today. Much of the online angst from those opposed to a Paramount-Warner merger believes it would bring too much power and influence to too few media companies. But that reaction is stuck in the monoculture of the past, when networks and studios were titans of an industry that decided what America watched on Thursday night.

Distribution has always been central to film industry profits. Today’s distribution landscape, with its narrowing theatrical windows and shrinking box office receipts is increasingly dominated by tech platforms with global reach and whose market caps dwarf those of the largest legacy studios. Antitrust regulators shouldn’t judge the media power and influence of a Paramount–Warner Bros. entity solely against that of The Walt Disney Company. The real competition for both Disney and Paramount lies with big tech: Apple, Amazon, Microsoft, Alphabet and even the David Ellison's dad Larry since Oracle is now part of the joint venture that controls TikTok’s U.S. operations.

Movies must now compete for an audience fragmented across streaming apps, social feeds, gaming platforms, and YouTube channels, all steered by algorithmic recommendation engines, and it's hardly a fair fight. The big tech platforms vying for your attention care more about keeping your brain locked in an engagement loop than prestige entertainment. Today, movies are just a mid-tier contender in the new economy built around stealing moments of your attention.

The new word for all entertainment media is “content,” and if you feel the word has a sterile, impersonal ring to it, you’re not alone. It represents a commodification, or more specifically a "softwarization" of what people once called “the arts” with a straight face. “Content” reduces the generational classic movies that we introduce to our children to little more than engagement metrics. But the film industry itself isn’t entirely blameless for its compromised position in the attention economy.

Once a communal center for popular culture, movie theaters are increasingly lonely places.

The Hollywood Cargo Cult

Rather than adapt to the new digital reality, the big Hollywood studios lingered on as a cargo cult pantomiming the actions of a film industry long past, complete with lavish spending on productions, marketing and high-paid executive oversight while expecting the planes to return overhead to drop the cargo. Audiences aren’t returning in historic numbers, and movie theaters will increasingly become niche centers for entertainment with fewer big hits every year. According to a recent Pew survey, only about half of Americans and Canadians went to the movies in 2025, buying only 769.2-million tickets. That's just under half the total box office sales of Hollywood's peak in 2002 when around 1.6-billion tickets were sold. It's tempting to blame declining theatrical attendance on declining movie quality due to overtly political messaging in many would-be blockbusters today. Filmmaker Roger Avary explained in a recent interview that corporate propaganda has always been part of Hollywood films, even if previous eras allowed directors to insert propaganda of their own. But most of today's big budget films, especially those based on expensive intellectual property, are all corporate propaganda disguised as subversive politics that only the rich and famous of Hollywood can afford to believe. But the biggest problem for movie theaters today is a simple change in viewer preferences. Those of us with teenage kids can already see that for the upcoming generation, new movie releases just aren't the big events they were just 10 or 20 years ago. I was surprised to learn one movie got the kids going to the theater last year when my daughter and all her friends had to go see the anime Demon Slayer movie in summer 2025, that was a first. Overall, the cinematic experience is on a trajectory where future generations will see going out to movies as a luxury sub-cultural practice, similar to how Timothée Chalamet sees attending the opera or ballet today. But even if we're witnessing the breakdown of the centralized Hollywood system, as long as there are still people who love movies, there will be people that love making them. New technology will only make production cheaper and easier, creating more independent competition for the big studios.

Calls for regulators to prevent Warner's sale to Paramount come from the naïve belief that combining two debt-laden studios will result in the Sum of All Fears, turning Paramount into a media-influence superpower. Given the decline in theatrical attendance and cable TV, Paramount-Warner's best hope lies in the growth of its own distribution platform, Paramount+. Adding HBO Max will likely mean that There Will be Bundles! Surely there will be tiered subscription when Paramount+ expands with Warner. But Paramount could become Top Gun by increasing the sheer Gravity of its platform with Warner’s library. We'll have to wait and see if it's enough to top Netflix. But over time, a leaner, more cost-conscious Paramount-Warner can pay down debts and transform into a profitable, perhaps even Interstellar new studio. Standalone studios like Paramount and Warner aren’t consolidating to achieve industry dominance. They’re consolidating to survive.

Classic Paramount & 1 Mediocre Warner: Sum of All Fears, There Will be Blood, Top Gun, Gravity (Warner) & Interstellar.

Small studios can survive by staying lean and licensing their work to the big distribution platforms after a theatrical release. Mega-studios like Paramount-Warner may yet survive because they own their own distribution infrastructure. That’s David Ellison’s plan when he moves Paramount+ hosting onto his father Larry's Oracle cloud services. The most hazardous place for a film studio today is in the middle: too large to be nimble, but too small to compete with companies whose content budgets are subsidized by iPhones, cloud servers, or global retail empires. 

Media consolidation isn’t going to create the next William Randolph Hearst. But it may help the medium of the 2-hour-long movie survive for another generation in a media landscape increasingly dominated by 20-second user-generated videos.