David Ellison’s pursuit of Warner Bros. Discovery has cleared a major obstacle, putting Paramount Skydance on course to complete the $110 billion merger in about two weeks. But Wall Street analysts say the company’s potentially formidable streaming position will arrive with an equally imposing challenge: more than $77 billion in estimated net debt.
The path to closing opened after Paramount reached a settlement with 12 Democratic state attorneys general, resolving their antitrust case seeking to block the transaction. Ellison told employees in a Monday memo that the merger was now expected to close within roughly two weeks.
Morgan Stanley analysts Sean Diffley and Daniel Duran called the outcome “a clear positive for the pro-forma PSKY + WBD” in a Sept. 22 research note, citing the broad range of scenarios and concerns that had surrounded the transaction.
Crucially, the settlement does not require Paramount to make immediate divestitures. Its limited behavioral commitments include a pledge that Paramount-Warner Bros. will release at least 30 films annually with a 45-day theatrical window — a commitment Ellison had already made.
A Major Streaming Combination
For the analysts, the most compelling opportunity lies in bringing HBO Max and Paramount+ together. They project that the two services could exceed 240 million subscribers by 2030.
“We view the combination of HBO Max and Paramount+ as a streaming powerhouse that has the potential to go from the 4th and 5th streaming services to rivaling Disney and Amazon for the 2nd and 3rd spot behind Netflix in premium SVOD,” the analysts wrote.
The services currently have an estimated 28% subscriber overlap, according to Morgan Stanley. Diffley and Duran acknowledged that some customers will inevitably cancel after the combination, but their consumer survey also suggested room for growth.
Among respondents who did not subscribe to either HBO Max or Paramount+, approximately 23% said they would likely add the combined offering as another streaming service. Another 17% said it would replace a service they already use.
Ellison has said HBO Max and Paramount+ will be merged into one consolidated streaming platform. However, details about the timing, branding and structure of that platform have not yet been disclosed.
The combined company would also control franchises including Game of Thrones, Lord of the Rings, Harry Potter and the DC Universe. Diffley and Duran argued that scale and intellectual property are increasingly important in a fragmented media market, even as they acknowledged the difficulty of integrating two large media businesses.
The $77 Billion Debt Problem
The opportunity comes with extraordinary financial pressure. Morgan Stanley estimates that Paramount-Warner Bros. will carry $77.2 billion in net debt at the end of 2026, reflecting financing for the merger as well as debt tied to earlier deals.
That figure is projected to decline only modestly to $75.1 billion in 2027. The analysts also forecast $6.37 billion in interest expense next year, underscoring how much of the company’s financial performance will depend on successfully combining operations and generating savings.
Diffley and Duran nevertheless believe Paramount-Warner Bros. can meaningfully reduce its debt burden during the first three years. They forecast more than $6 billion in savings, equal to about 11% of operating expenses.
Those reductions are expected to come from consolidating technology systems, improving procurement, “rationalizing real estate” and cutting overlapping corporate and marketing roles. The last category points to layoffs as the merged company removes redundant functions.
Morgan Stanley’s figures put free cash flow at $2.16 billion in 2017 and project it will reach $8.12 billion by 2030. On that basis, the analysts believe the company can lower its ratio of net debt to adjusted EBITDA from between six and seven times at closing to between three and four times within three years.
The shape of the business is also expected to change. Streaming and studio operations are projected to account for a larger share of the company as its reliance on linear television declines. Linear networks are forecast to fall below 50% of pro-forma EBITDA in 2028 and to approximately 30% by 2030.
What Happens Next?
The immediate focus will be completing the merger on the timetable Ellison outlined to staff. From there, Paramount-Warner Bros. must integrate its businesses, deliver the projected cost savings and reveal how HBO Max and Paramount+ will function as a single platform.
As Diffley and Duran put it, “the hard part begins now.” Their analysis presents a company with the scale, franchises and subscriber base to become a much stronger streaming competitor — but one that must prove it can turn those advantages into enough cash to bring a towering debt load under control.