Can David Ellison pull off Hollywood’s megamerger?
The audacious deal to combine Paramount and Warner Bros has huge repercussions and steep challenges
When Paul Thomas Anderson’s One Battle After Another won Best Picture and five other Oscars this month, it capped a banner year for Warner Bros, and gave its likely new owner a reason to smile.
A record haul of 11 Oscars, including four for Sinners and one for Weapons, plus total box office takings of $4bn from a run based mostly on original scripts instead of sequels, was a reminder of why Warner Bros has always been such a coveted Hollywood property.
It has had three owners so far this century, two in the past eight years alone. And it could soon have a fourth if David Ellison, the movie-loving 43-year-old son of Oracle founder Larry Ellison, has his way.
In the span of only seven months Ellison has committed nearly $120bn to secure Paramount and Warner Bros Discovery. If regulators assent to the latter deal, two of the most illustrious studios in Hollywood history could soon be owned by a youthful producer known for his vast family fortune, love of stunt flying and middle-of-the-road taste in films.
It is the most audacious power grab Hollywood has seen in years — and a test of whether dynastic wealth, political connections and a passion for movies are enough to build a successful media empire during a period of epic disruption.
Ellison’s entertainment empire will own two century-old studios freighted with challenges, many of which stem from the streaming revolution launched by Netflix in 2007. Both companies own large portfolios of cable TV networks that have been losing viewers and revenue for years as audiences shifted to streaming. Then there is the $79bn mountain of debt taken on to pay for the Warner Bros deal.
“This is a tough, tough industry,” says a Hollywood studio executive. “It’s a shrinking pie. It really is just going to be the same slog that it was for Discovery,” the executive adds, referring to the merger that created the current WBD.
Ellison is pitching his deal as a solution to this malaise. “We have the opportunity to help shape the future and build a next-generation media and entertainment company,” he said this month. “This is not about consolidation, it’s about reinventing the business.”
Many in Hollywood and on Wall Street wonder whether Ellison, whose management experience has been limited to running his own independent studio, Skydance, has what it takes to pull off such a complicated deal in a challenged industry.
“It’s interesting that the guy in charge of the largest and most leveraged film and television merger in world history has not previously run a large company before,” says Peter Supino, an analyst at Wolfe Research, of Ellison.
“The execution risk and the financial risk are exceptionally high, and they must be higher with a person in charge who’s new to running large companies.”
The Hollywood studio executive puts it more bluntly. “This is about empire building, and that is not something for which I think he is equipped,” he says. “He’s not a captain of industry in the way his dad is. His interest lies in the creative side of the industry.”
Executives at the company are aware of the scepticism. A person close to Paramount says the Ellisons are different because they are “owner-operators”, adding: “The Ellison family puts their money where their mouth is.”
Ellison and his team proved themselves tenacious and determined dealmakers in beating private equity group Apollo and Sony in an eight-month battle to secure control of Paramount from the Redstone family. The merged group then began a pursuit of Warner Bros that culminated in a $111bn bid, seeing off an offer from Netflix that Warners’ board had accepted.
Assuming regulators approve the combination, the expensive bidding war will force Ellison to slash costs immediately. He insists he can do so without significant job cuts, and expects to realise $6bn in synergies.
The Hollywood executive concedes that Ellison “is smart enough to have surrounded himself with smart people”, including Gerry Cardinale, managing partner at RedBird Capital Partners. Half of the members of Paramount’s 10-person board have backgrounds in finance or private equity, a data point that makes some in Hollywood nervous.
The Ellisons have political capital too. Some figures in US President Donald Trump’s orbit, notably defence secretary Pete Hegseth, have welcomed the prospect of Warner’s CNN changing hands, hoping the network could shift rightward under new ownership. Trump has recently praised the Ellisons as “a great family”.
Ellison has promised to invest heavily in new content, committing Paramount and Warner Bros studios to each release a minimum of 15 new films in cinemas per year, having released 20 between them in 2025.
That has delighted cinema owners, who blame declining box office receipts on a lack of steady supply rather than the shift to streaming. “David Ellison has produced some of the highest grossing movies in history,” says Tim Richards, chief executive of Vue. “Even if he can’t reach 30 movies a year, there’s still going to be many more than before.”
But others have doubts, saying the costs of production and distribution would be enormous. Ellison’s target would entail releasing movies every two weeks, they say, which would compete with each other for audiences and marketing spend.
“You’re going to release 30 movies a year and it’s all going to be fine?” says one studio veteran. “In this day and age? Come on.”
Completing the Warner Bros takeover would leave the Ellisons atop a media and entertainment empire that includes some of the most coveted brands and libraries in the world.
Warner’s Harry Potter franchise, DC Comics, and Game of Thrones creator HBO would join Paramount’s Yellowstone, the Mission Impossible movie franchise and the CBS TV network. It would be a powerhouse in news, with CNN joining Paramount’s CBS News and 60 Minutes. Combining the Paramount+ streaming service with HBO Max would reach an estimated 200mn subscribers, becoming a rival to Disney’s streaming offerings.
However, Warner investors with long memories will recall previous promises of cost savings and growth, starting with the AOL-Time Warner merger in 2001, now regarded as one of the worst deals of all time. After a lengthy restructuring, AT&T made a disastrous acquisition of Warner Bros in 2018, leading to its merger with Discovery four years later.
Wall Street is cautious. Equity analysts at Bank of America, which provided debt funding for the deal, reiterated their “underperform” rating on Paramount Skydance shares this month, citing “integration complexity”. Fitch Ratings has downgraded Paramount’s debt to junk, pointing to the challenges of integrating two large media groups at the same time.
In a recent presentation to investors, the company said it had a three-year plan to dramatically cut its debt and secure an investment-grade rating.
The huge debts are setting off alarms in Hollywood too: memories of the thousands of job losses that followed the Warner Bros-Discovery merger are still fresh.
Ellison has said the company will find efficiencies without harming creative output. But “it’s improbable that you would have a merger of this size without some headcount reductions,” says Fitch analyst Wunmi Adekanmbi.
She notes that Ellison has said that he intends to protect creative jobs. “They want to do their best to keep the creative team largely intact,” she says.
Stephen Galloway, dean of Chapman University’s Dodge College of Film and Media Arts, says that it’s “an absolute certainty that hundreds if not thousands of people are eventually going to lose their jobs” as a result of the deal.
“Whatever [Ellison] says, it’s inevitable,” he adds. “The cost of the deal is astronomical. When you spend that much you have to defray it. People are really petrified about their jobs.”
This will be the third merger in less than 10 years for some Warner employees, an experience company veterans describe as traumatic.
“Everyone in Warner Bros is asking what their futures are at the moment and whether or not they have a place in the combined company,” says a person who attended a town-hall meeting with Ellison in early March. “He seemed genuinely excited about the deal. But there was no great substance to what he was saying.”
Hollywood has seen its studios swallowed up by outsiders before. But this deal represents the first time a family dynasty from Silicon Valley has taken one of Hollywood’s crown jewels.
The Ellisons’ tech fortune — Larry Ellison is worth about $200bn — far exceeds that of recent Hollywood dynasties including the Redstone family, who started out in the drive-in cinema business, or the Murdochs, whose wealth was built from a newspaper empire.
Some see a potential parallel, in terms of scale and influence, with Rupert Murdoch’s empire at its peak. Many believe the elder Ellison, who is close to Trump, will use his newfound influence over CNN to shift coverage rightward, as appears to already be happening at CBS.
David Ellison bought The Free Press, an online publication founded by anti-woke opinion journalist Bari Weiss, for $150mn and installed her as head of CBS News last year. Her tenure has been marked by newsroom tensions and complaints from some staff about pressure to soften coverage seen as hostile to the Trump administration.
The impression that an ideological shift might be coming was amplified on March 13 when Pete Hegseth, Trump’s defence secretary, criticised CNN’s coverage and remarked that “the sooner David Ellison takes over that network the better”. Trump himself listed CNN’s possible change of ownership as one of his “wins” in a social media post this month.
Galloway says David Ellison’s politics are less clear than his father’s. “Even though his father’s a big Trumpite, the perception is that David is not,” he says. “There’s an ambiguity in how he’s regarded. Nobody’s really certain.”
The younger Ellison has previously said he wants the company’s news businesses to cater to “the 70 per cent of the country that kind of would define themselves as centre-left to centre-right”.
Whatever the politics, analysts say CNN, the pioneering cable news network founded by Ted Turner is going to shrink. Network executives at CNN and CBS had long considered a tie-up that would allow them to share bureaus and studio space to cut costs. Given CNN’s absolute and relative ratings declines in recent years, the cuts are expected to be deep.
“CNN headcount is going to drop by the thousands,” Supino of Wolfe Research says. “A company with $80bn of debt does not have the luxury of maintaining duplicative newsgathering teams.”
But for some former Hollywood executives, the importance of the news business to the Ellisons’ calculations cannot be overstated. “The idea that they don’t need to focus too much on making money [at the film studio] as long as they have ideological control — I think therein lies one of the keys to what this deal is all about,” says one.
People who have worked with David Ellison say movies have always been his passion. He cultivated relationships with James Cameron, the creative force behind The Terminator, Titanic and Avatar, and John Lasseter, the longtime Pixar chief who produced Toy Story and other classics.
“David recognised that John Lasseter, for a moment, was a generational talent,” says a Hollywood studio executive. “He cultivated a relationship with Jim Cameron, who is still a generational talent.”
Lasseter left Pixar in 2018 after accusations of unwanted touching in the workplace, and Ellison hired him the next year to run his start-up animation business. Ellison grew up around Lasseter and Pixar co-founder Steve Jobs, who was a close friend of his father.
Ellison’s professional relationships with his heroes did not always result in their best work, however. Cameron partnered with Skydance and Ellison to produce Terminator: Dark Fate in 2019, which garnered poor reviews and flopped at the box office. But Cameron remains a supporter of Ellison, publicly endorsing Paramount’s bid for Warner Bros.
With Lasseter leading Skydance Animation, Ellison struck a multi-film deal with AppleTV+ to supply four animated features to the streaming service. But the quality was “abysmal” in the words of one Hollywood executive, with the Rotten Tomatoes score for Luck at just 48 per cent. The deal ended after only two and a half years, and Netflix signed a deal with Skydance after the agreement ended.
The episode reflects a common criticism of Ellison: that he has put out a lot of unremarkable movies. “His taste tends to be formulaic,” says a movie producer. “He really specialises in the sort of mediocre, bland movies that populate streamers.”
Yet Ellison has also been involved in a handful of very big hits, including Top Gun: Maverick, the blockbuster sequel to the 1986 Tom Cruise film, which he co-produced.
“[Ellison] loves flying, he loved Top Gun, and I think that it is fair to say that he was one of the main engines to get Top Gun: Maverick off the ground through his persistent pursuit of it,” says the Hollywood studio executive.
The acquisition of Warner Bros would bring some of the most talented studio chiefs in Hollywood under Ellison’s roof. Casey Bloys, who heads HBO, has overseen Game of Thrones, House of the Dragon, The Last of Us, Succession and The White Lotus.
Ellison met Bloys for the first time this month following speculation about his future at the company post-merger. “Ellison can’t lose him,” says a longtime entertainment executive. “Casey is a proven, seasoned entertainment executive [and is] respected around the town.”
If nothing else, the Warner creative team should take heart at Ellison’s claim that the combined Paramount-Warner Bros will spend more on creating new content than any other media company.
But some think he will run into the same problems that David Zaslav, chief executive of Warner Bros Discovery, faced after acquiring the company from AT&T in 2022, amassing a $50bn debt pile. As its cable division lost viewers and advertisers, the company was forced to constantly slash costs in order to pay off debt.
Zaslav pledged that group earnings before interest, taxation, depreciation and amortisation would grow to $14bn by 2023, bringing debt down to a manageable level. But ebitda was $8.7bn by 2025 and Warner Bros shares fell 70 per cent before Paramount made its move.
Rich Greenfield, an analyst at research firm LightShed Partners, says David Ellison is telling the “exact same story” as Zaslav did in 2021.
“The cardinal sin of Zaslav was they were too levered at the start, and this company is even more levered at the start,” Greenfield says. “I wouldn’t want [as much debt] but they say they are extremely comfortable that they can achieve the cost cuts they’ve planned. We’ll see.”
Ellison is already proving his willingness to spend on talent and content as a way to draw new subscribers to Paramount+. He has paid $7.7bn for TV rights to Ultimate Fighting Championship up to 2033 and struck an exclusive deal with the Duffer Brothers, the team behind hit Netflix series Stranger Things.
But he will have to find another $1bn a year to allow CBS to continue broadcasting Sunday NFL games until 2033, after the Paramount-Skydance deal triggered a change-of-control provision allowing the NFL to revisit their agreement. The NFL is considered to be a must-have for CBS. “The entire Warner Bros-Paramount deal hinges on one thing, and that’s the NFL,” says Greenfield.
To competitors and former executives, there are questions about where the money for Ellison’s plans will come from, even with one of the world’s richest men backstopping the venture.
“It’s just math,” says the longtime entertainment executive. “Are they going to be adding money to the budget after spending [billions] on UFC? . . . Where are you getting the money when you’re servicing $80bn in debt?”
