100 Days of Madness: Netflix, Paramount, Warner and the Future of Hollywood
Paramount's victory over Netflix in the battle for Warner Bros. Discovery is the most momentous turning point in cinema since Gulf+Western bought Paramount in 1966.
Make yourselves comfortable. This is a long one. The topic warrants it. I’ve spent months doing the research and building the datasets — work which others could and should have done, but didn’t.
With few exceptions, the reporting on the Warner-Netflix-Paramount affair has been dismal, and the social media conversation even worse, wallowing in the kind of fact-free hysteria, paranoia and reckless misinformation which has sadly become commonplace in too much so-called “entertainment journalism.”
To remedy this sorry state of affairs, this piece will not be placed behind a paywall nor broken up into multiple parts so that the research and analysis can reside in a single place for easy access and reference.
It will change not just how you see the proposed Paramount-Warner merger, but how you see Hollywood generally, where it’s going and what this deal could potentially bode for the future of “the business.”
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I have literally started, stopped, restarted and rewritten this post about 350 times since the Netflix deal to purchase Warner Brothers Discovery (WBD) was announced on December 5 of last year. This was initially going to be a dissection of the proposed Netflix deal and a) why it made no sense and b) why it was doomed. I was already on record with my Christmas Day Netflix Song predicting an eventual Paramount win — which finally came to pass on February 26 — so there was no overriding reason to do so again other than to rebut the projectile vomiting of idiotic misinformation and bad analysis that flooded every corner of the Internet throughout the better part of December and January (with the exception of a few, like YouTube entertainment news channel WDW, who also predicted a Paramount win). I did, however, save two issues of the weekly edition of Variety in anticipation of this very moment. Released a month apart, on November 5 and December 10, respectively, they tell a fascinating story:
For those who might wish to revisit the two cover stories, both the David Ellison piece and the Netflix piece provide valuable backstory for this post in which I will try to make sense of what actually happened and what it means going forward. They also furnish some fascinating hindsight, starting with Netflix CEO Ted Sarandos’ very public bravado after the announcement of the December 5 WBD deal was met with an immediate hostile takeover action by Paramount CEO David Ellison:
“Today’s move was entirely expected… We have a deal done. We’re super confident we’re going to get it across the line and finish.”
Now consider the November story, which quotes Ellison’s private comments to associates “even before the Paramount deal got the Trump administration’s approval”:
“We’re going after Warners… I want to be in the top three, not the bottom three.”
While Ellison waged a tactical battle behind closed doors, Sarandos pursued a clumsy public relations campaign, apparently believing that optics were more important than deal points. While Sarandos — against whom I have nothing personally — is an undeniably seasoned executive, he is also consistently undisciplined in his messaging. Consider his remarks in April of 2025 at the Time100 Summit, where he averred that making movies specifically for the “communal experience” in movie theaters was an “outmoded idea”:
“Folks grew up thinking, ‘I want to make movies on a gigantic screen and have strangers watch them [and to have them] play in the theater for two months and people cry and sold-out shows… It’s an outdated concept.”
I would here remind everyone that I already took Sarandos to task for that statement at the time in pointing out that it came just days after the box office-shattering opening of Ryan Coogler’s Sinners (which would go on to shatter Oscar records as well with 16 nominations and 4 wins) and Coogler’s own very high-profile social media thank-you note reaffirming his belief in the theatrical experience. Sarandos was clearly aware of what had just transpired in the culture and was deliberately — and inelegantly — doubling down to save face based on his New York Times interview a year earlier wherein he offered possibly the worst argument in movie history to back up his stated belief that Barbie and Oppenheimer would have performed just as well on Netflix as in theaters:
“I don’t think there’s any reason to believe that certain kinds of movies do or don’t work. There’s no reason to believe that the movie itself is better in any size of screen for all people… My son’s an editor. He is 28 years old, and he watched ‘Lawrence of Arabia’ on his phone.”
While we have no formal record of Sarandos being visited by Jesus on the road to Damascus, the conversion he must have experienced over the ensuing seven months is hard to describe as anything but “Pauline.” Scarcely five weeks after the announcement of the Warner Bros. Discovery deal, it was a whole new Sarandos backtracking everything he had previously told the New York Times:
“Once the company was in play, it would have been reckless for us not to look at it… to get into the books and understand the business model better, and [we] had a lot of assumptions that weren’t necessarily true… The general economics of the theatrical business were more positive than we had seen and we had modeled for ourselves.”
To put Sarandos’ claim in perspective — imagine Elon Musk justifying a proposed merger between Tesla and General Motors by conceding that he never really understood that whole internal combustion engine thing and just needed to “understand the business model better.” Granted, Sarandos has basically been a home video executive his entire career — but that’s still a critical part of the overall Hollywood ecosystem. The only thing more absurd than a heavyweight Hollywood CEO claiming he never really understood the studio distribution model is Sarandos’ apparent belief that a New York Times journalist as experienced as Nicole Sperling wouldn’t call him out:
Sperling: “Do you regret saying that the theatrical business was an ‘outmoded idea’?”
Sarandos: “You have to listen to that quote again. I said ‘outmoded for some.’…You’re not going to get in the car and go to the next town to go see a movie. But my daughter lives in Manhattan. She could walk to six multiplexes, and she’s in the theaters twice a week. Not outmoded for her at all.”
For the record, Sarandos did not say “outmoded for some.” He said “for most.” Either way, it’s embarrassing and disingenuous backtracking. Sperling’s only missed opportunity was not querying Sarandos on why his theater-going daughter doesn’t drag her misguided brother away from his phone and into a proper cinema.
Incredibly, Sarandos wouldn’t hit rock bottom until several weeks later when, on February 3, just shy of the two-month mark since the announcement of the WBD deal, he and Netflix Chief Revenue and Strategy Officer Bruce Campbell appeared on Capital Hill and testified to the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights in what can only be described as one of the worst train wrecks in C-SPAN history. I highly recommend watching the entire excruciating affair as a primer on what happens to people who aren’t adequately prepared for the shark tank of a Capital Hill inquisition. When pressed by Senator Josh Hawley on the subject of “full residuals,” Sarandos resorted to channeling Ralph Kramden:
It’s easy to imagine David Ellison licking his chops at the performance — because just three short weeks later, literally minutes after Sarandos walked out of a meeting with then-U.S. Attorney General Pam Bondi to iron out potential antitrust issues, Warner Bros. Discovery announced they had accepted the increased Paramount bid of $31 per share. Netflix had precisely four days to weigh a counteroffer. Instead, they tapped out after a few hours.
To summarize, in just three short weeks, Ted Sarandos went from:
“…we want to win. I want to win opening weekend. I want to win box office.”
to:
“This transaction was always a ‘nice to have’ at the right price, not a ‘must have’ at any price…”
And this, dear readers, is why 70% of people think CEOs are compulsively dishonest.
Let’s back up…
Enough ripping on Ted Sarandos — in fairness and full disclosure, he’s extremely genial and a very nice man. Nothing I write here should be taken as an attack on him personally or on his character — the actions recounted above reflect what just about any other CEO in his position would have done. While he shouldn’t be fully absolved of responsibility for his clumsy public statements, the truth is they probably say more about the inexperience of his corporate communications team. It’s their job to prepare executives accordingly, and they plainly failed to do so for reasons I’ll get into shortly — because they underscore broader structural and philosophical problems with Netflix generally. I’ve bumped into Sarandos at more than a few premieres and events and he has never been anything less than a gracious host. At the 2025 Netflix Christmas Party, as I stood staring at a sprawling buffet of candy and sweets — marveling at how it represented the perfect metaphor for Netflix itself (all calories, no nourishment) — Ted himself grabbed my elbow in passing and asked, “Finding everything you want?”
Again, nothing if not a gracious host — but the question was revealing. It could just as easily have been asked about the service’s streaming offerings. It’s their underlying philosophy about everything: abundance breeds satisfaction. Quantity obviates the need for quality.
Netflix is a scalability-based tech enterprise hurling a massive content bomb into a scarcity-dependent creative industry in hopes of generating the kind of share price appreciation Wall Street investors are accustomed to seeing from Silicon Valley, and which they have persistently sought — unsuccessfully — from Hollywood...
As I have argued here many times previously, Netflix is not really an entertainment company — it’s a tech company dabbling in entertainment, seeking to reinvent an industry that needs no reinvention by importing a Silicon Valley business model Hollywood neither wants nor needs, to disrupt a system which has worked extremely well for generations of artisans and audiences — but less well for the investment class. Bluntly put, Netflix is a scalability-based tech enterprise hurling a massive content bomb into a scarcity-dependent creative industry in hopes of generating the kind of share price appreciation Wall Street investors are accustomed to seeing from Silicon Valley, and which they have persistently sought — unsuccessfully — from Hollywood… until Netflix.
Imagine Costco setting up shop next to a farmer’s market — not because the community wants it, but because the investor class demands it — then doing everything it can to destroy the farmer’s market by undercutting them with a torrent of cheap, low-quality goods and pretending this somehow constitutes “progress.”
Prior to the ill-fated Warner Bros. Discovery deal, Sarandos and his co-chairs — first Reed Hastings, then Greg Peters — had always practiced restraint in so-called M&A — the cutthroat business of “mergers and acquisitions” where many a seasoned CEO mightier than Ted Sarandos has been felled in battle. How, then, did a company which had previously never paid more than tens of millions of dollars for the majority of its acquisitions — with the sole, noteworthy exception being their 2021 purchase of the Roald Dahl Story Company for $700 million — end up offering over $82 billion ($72 billion in equity) for the purchase of a 100-year-old legacy American studio whose business model they had dismissed as “outdated” just seven months earlier?
Let’s revisit the timeline — which lasted for the better part of a year — through to the final 100-day auction drama:
Mar 12, 2025 — Skydance CEO David Ellison privately signals interest in Warner Bros. Discovery (WBD) assets while the previous Paramount Global merger is still before the FCC.
Apr 2, 2025 — Ellison’s team initiates informal outreach to WBD leadership.
Apr 29, 2025 — WBD board begins internal strategic review.
May 20, 2025 — Deadline and Variety report on merger/acquisition talks between Skydance and WBD.
Jun 18, 2025 — Ellison explores approaches private equity and sovereign investors to become financing partners.
Jul 9, 2025 — WBD begins formulating scenarios for structural separation of studio assets and distribution infrastructure.
July 24, 2025 – FCC approves the Skydance-Paramount merger.
Aug 7, 2025 – Skydance–Paramount merger closes; David Ellison becomes chairman and CEO.
Aug 21, 2025 — Ellison continues to lobby WBD on a merger with the new Skydance-Paramount.
Oct 10, 2025 — WBD leaks that it is willing to entertain formal offers.
Nov 18, 2025 — WBD sets first bid deadline for November 20. Variety reports Paramount, Netflix, and Comcast will all make formal offers.
Nov 25, 2025 — WBD asks for improved second round bids by December 1.
Dec 1, 2025 — Bidders submit binding offers submitted.
Dec 5, 2025 — Netflix announces agreement to acquire WBD studio + streaming assets with a deal valued at $27.75 per share. Paramount immediately challenges the deal, submitting a letter to WBD arguing that the Netflix deal is inferior to their offer and faces greater regulatory scrutiny and risk.
Dec 8, 2025 — Paramount launches hostile bid with direct appeal to WBD shareholders — raises offer to $30 per share, all-cash.
Dec 10, 2025 — Ellison reaffirms Paramount offer of as superior to Netflix deal in letter to WBD shareholders.
Dec 17, 2025 — WBD rejects Paramount offer — reaffirms Netflix deal.
Dec 22, 2025 — Paramount sweetens offer. WBD agrees to review.
Feb 11, 2026 — Activist investor Ancora enters the fight and backs Paramount.
Feb 15, 2026 — WBD reopens negotiations with Paramount.
Feb 17, 2026 — WBD sets Netflix shareholder vote date for March 20 even as Paramount negotiations continue.
Feb 23, 2026 — “Best and final” window closes
Feb 24–25, 2026 — Paramount raises bid to $31 per share.
Feb 26, 2026 — WBD deems Paramount offer “superior.” Netflix given four days to match but declines. Paramount wins.
Obviously, there remains the April 23 WBD shareholder vote to ratify the board’s acceptance of the Paramount bid followed by a lengthy gauntlet of Federal, state and EU regulatory scrutiny before the merger is finalized, though Ellison is banking on an expedited timetable with the Feds this Fall. Given precedent, it seems unlikely any serious obstacles will emerge. As the prior Paramount Global drama revealed, David Ellison is shrewd, patient and tenacious. The timetable for the WBD merger is already faring better than Ellison’s previous Skydance-Paramount Global merger which took the better part of two years, beginning in December 2023 before briefly collapsing in May 2024, followed by a restructured proposal, new talks and, finally, a signed deal in July 2024.
What was lost in the momentary euphoria over the Netflix deal was that WBD wasn’t even on the block until Ellison broached the topic — and not as an afterthought. All indications are that Ellison had his eye on a combined Warner-Paramount megastudio possibly as early as mid-2023. Acquiring Paramount wasn’t the endgame — it was the means to a bigger endgame, and David Ellison was never not going to prevail.
I first asserted as much in a LinkedIn post right after Ellison launched his hostile bid in December 2025:
I doubled down that same day when the Writers Guild of America (WGA) lost its mind:
And I doubled down again the day before Paramount closed the deal:
It’s worth making time to read the backstory of Ellison’s acquisition of Paramount Global as a preface to what happened over the course of 100 days leading into the victory over Netflix. If you had followed the earlier deal, you saw the writing on the wall with Warner Bros. Discovery. It followed the same playbook with just as many ups and downs — and ended with the same result.
Why, then, did Netflix even get in the game? And why did the WBD board hold out so long despite repeated entreaties from Paramount that were clearly, by any objective measure, superior?
To answer these critical questions — which too few have bothered to ask much less answer — and get a sense of what this means for the future of cinema as an art form and Hollywood as its industrial center of gravity, we’ll have to perform a deep dive that blends history, economics and mind-reading.
Let’s examine each of the players individually — and fasten your seatbelts — it’s going to be a bumpy night.
Netflix
For my first draft of this post, back in December, I sought to illustrate the sheer farce of the bidding process with the following allegory:
Imagine you’ve recently purchased a gallery filled with wonderful classic paintings and it has just been announced that a competing gallery — let’s call the owner “David Z” (so we don’t confuse him with you, David E) — with its own private collection of classic paintings is up for auction. You could not be happier. You’ve been to David Z’s place a thousand times and you’ve always admired the works inside, maybe even dreamt that one day it would all be up for grabs and you’d have a fair shot at it. After all, the two galleries are a perfect fit.
Suddenly, after endlessly needling David Z how much you’d love to take the gallery off his hands — he puts it up for sale. So you head to the auction with your wad of cash, knowing that absolutely nobody can or will outbid you.
Upon arrival, you’re handed your bidder paddle bearing the number “1.” Good omen, right? You smile at David Z, who also happens to be the auctioneer. Your interactions have always been cordial, so you have no reason to suspect anything untoward is afoot.
Then you see “Brian” walk into the room with bidder paddle number “2.” Fair enough. Brian’s a gallery owner, too, so it’s not surprising that he’s here. All three of your galleries have been around a very, very long time. The only other gallery with as much history is Bob’s, and he won’t show up because he unwisely spent the past two decades buying toys and comic books that had nothing to do with his core business. He also grossly overspent on Rupert’s gallery a few years back which is mostly just lying empty, so he’s too levered to be interested. It’s really going to come down to you and Brian. Besides, Brian is really here to just save face. He and David Z are literally down the street from each other. How would it look if he didn’t at least make a showing?
Nah. You’ve got this.
That’s when “Ted” comes in holding bidder paddle #3. You and Brian look askance at each other with precisely the same expression: “Really?”
You see, Ted is “that guy.” He’s not in the gallery business. He sells postcards. You and Brian occasionally let him sell a postcard reproduction of paintings that you own, but never in a million years would you expect Ted to want to own and operate a gallery. It would make more sense for a gallery to buy Ted’s postcard shop. He’s spent too much time mocking the rest of you and ridiculing the gallery business as old and dusty and “outdated.” He keeps harping on how “postcards are the future!” and that they “meet people where they are,” and how, unlike a painting, “you can sell as many postcards as you can print!” He thinks you’re all crazy to not see the writing on the wall.
You and Brian trade smirks — you’re thinking the same thing. Ted doesn’t really want the gallery. He just doesn’t want you or Brian to get the gallery. But you’re not worried. Because you know you’ll outbid Ted any day of the week.
David Z announces the starting bid. You raise your paddle. He calls for a higher bid. Brian raises his paddle. The call goes higher — you raise your paddle, but notice something suspicious. David Z and Ted seem to be making googly eyes at each other. Something’s not right.Another call — Ted raises his paddle. You raise yours at the next call. Game on. He’s nowhere near your ceiling — but you can’t shake the googly eyes.
David Z pushes the bid up: “Do I hear…” Ted has barely started to raise his paddle when…
“SOLD! TO BUYER NUMBER THREE!”
Wait… what? What happened to “Going once… going twice… going three times”? You shoot Brian a look. He shrugs. He wasn’t anywhere near his ceiling either, but he wasn’t serious about a bid in the first place. He was here to make a showing. But you were ready to see Ted’s bid and raise it again — except that David Z just up and sold to Ted without giving you the chance to beat it. They clearly had this worked out ahead of time. The only question is — why?Naturally, you’re not going to leave it alone. Something suspicious is going on — possibly something illegal — and you’re going to get to the bottom of it, by any means necessary.
Looking back on the overconfidence of the initial Netflix press release and the rapidity of Ellison’s subsequent hostile bid, it really should have been obvious to everyone that Netflix was only ever playing defense and Ellison was hellbent on staying on offense. At a time when Hollywood is still struggling to regain its footing after a half decade of debilitating COVID closures, labor strikes and ongoing political and regulatory headwinds, offense always wins the day.
Since closing the deal, Ellison has wasted no time in outlining the contours of that offense — declaring a broad vision aimed at “reinventing the business.” Less clear is what Netflix saw in a Paramount-Warner merger that so terrified Sarandos and Peters that they were willing to mortgage 20% of their entire company in a deal so hastily conceived they couldn’t even explain their reasons for wanting to do it. Ordinarily, Netflix would have spent months calming investors and analysts, priming the market, outlining their hopes and plans for the combined company and crafting corporate messaging to respond to the concerns of unions, theaters, regulators, elected officials and consumers. Basically what Ellison has been doing all along. Instead, the December Netflix-WBD announcement caught everyone off guard. Netflix stock tanked — effectively dooming any chance of countering an increased Paramount bid — and they were greeted with fury and/or disapproval from:
WGA West president Michele Mulroney.
Gaëtan Bruel, President of France’s National Cinema Centre (CNC).
Titanic and Avatar filmmaker James Cameron.
Apocalypse-fearing theater owners.
Former Amazon Studios film chief Roy Price.
Oscar-winning actress Jane Fonda.
California Senator Adam Schiff.
Massachusetts Senator Elizabeth Warren.
To name only a few.
While Trump eventually backed off to avoid the appearance of impropriety and interference, others turned up the heat. The WGA demanded that the deal be blocked and the Screen Actors Guild (SAG) purportedly began planning a labor strike as a nuclear option to tank it.
Part of the problem is that Netflix — which has a very capable stable of film publicists working with press — has not applied the same hiring philosophy at the corporate level. Because Netflix is fundamentally a tech company, their corporate communications strategy follows the tech playbook.
On December 5, Sarandos shot himself in the foot in spectacular fashion — which I called out on LinkedIn:
By the time Netflix got around to adjusting its messaging and offering vague promises about preserving the 45-day theatrical window while refusing to commit to preserving residuals, it was too late — nobody was buying it.
On December 15, ten days after the initial WBD deal announcement, Netflix touted the hiring of Dani Dudeck — formerly of Zynga, Instacart and MySpace — as Chief Communications Officer, reporting directly to Ted Sarandos. That same day, I called out Dudeck’s lack of entertainment industry experience in a LinkedIn post:
That assertion clearly triggered a few people — including the estimable Geno Scala who sought to take me to task not only for questioning Dudeck’s qualifications, but for my blanket declaration that Netflix would never prevail:
By the time Sarandos delivered his deer-in-the-headlights performance before the Senate subcommittee on February 3, Dudeck had been on the job three weeks — and clearly should have prepped him accordingly. To anyone forged in the fires of studio comms, it was a preventable catastrophe — you simply had to know showbiz and what parts of it senators would key on. As to who dropped the ball and why, we can only speculate — but I would assume that Sarandos and Campbell — like the good tech execs they are — came prepared to talk more about numbers than culture, and having hired no one with sufficient film industry experience to instruct them otherwise, left the hearing blindsided and confused.
While we can’t blame Dudeck for the earlier embarrassment of December 17, just two days after her hiring was announced, it warrants a mention here. In a carefully choreographed and staged photo shoot, Ted Sarandos and Greg Peters paid WBD CEO David Zaslav a visit on the Warner lot in Burbank where they strolled around pointing at things like they already owned them, a stunt Variety non-ironically deemed a “show of force.” I made known my thoughts on Facebook:
Who was the intended audience for this painfully staged ploy? WBD shareholders? Movie lovers? Theater owners? Guilds and unions? Variety reporters? We may never know. Just don’t be surprised if one or more of the photos end up framed on David Ellison’s office wall.
None of this is to say that Netflix isn’t successful... My argument is that without radical restructuring, its business model has no long-term future in Hollywood because it has deliberately devalued all the things that historically build value in Hollywood, namely a library, core assets and a meaningful brand.
Having established that Netflix was in far, far over its head and totally unprepared to close a deal more than a hundred times larger than any other deal in their history… just what the hell were they thinking?
I won’t bury the lede: Netflix is a troubled company. I realize that sounds absolutely idiotic given that their stock valuation is higher than that of any major studio and they’re seen as the 10,000 lb gorilla nobody can stop. We’ve all heard the story of how Blockbuster passed on buying Netflix for $50 million back in 2000, and how ten years later Time Warner CEO Jeff Bewkes dismissed buying Netflix for $1 billion, likening it to “the Albanian army,” and how Netflix, which is now valued north of $400 billion, is finally having the last laugh. Except that as I’m going to show — that valuation is a bunch of hooey. None of this is to say that Netflix isn’t successful — because it clearly is. My argument is that without radical restructuring, its business model has no long-term future in Hollywood because it has deliberately devalued all the things that historically build value in Hollywood, namely a library, core assets and a meaningful brand.
In terms of overall market share in television, Netflix lags all the major studio/network conglomerates — Disney, Warner, Paramount, NBCUniversal — as well as YouTube. In the world of streaming, it comes in a strong but distant second to YouTube which is rapidly pulling away while Netflix market share stagnates. This was the kind of wonky argument Sarandos attempted to make in his Senate subcommittee testimony without bothering to furnish the numbers to back it up. Instead, he threw on his infomercial persona and bragged about giving consumers “more content for less” — like buying a Ginsu and getting a full set of steak knives thrown in for free. The Senators weren’t buying it because they know how math works. The argument that to compete with a platform like YouTube, which earns $60 billion annually from $2.5 billion in content spend, Netflix needed to boost its content spend to $20 billion and leverage itself to the tune of $82 billion to purchase a century-old legacy movie studio and its library, wasn’t just suspicious — it was stupid.1
Further to the point, the notion that Netflix competes with YouTube simply because both are streaming platforms is like saying Substack competes with Craigslist because both feature web pages with words on them. It was a dodge, a diversion and not a very clever one.
What Sarandos could not come straight out and admit to the Senators was that the prospect of a Paramount-Warner merger posed an existential threat to the core narrative driving their stock valuation — a valuation which is at least ten times higher than can be reasonably justified.
Netflix, you see, is what’s known as a “story stock.” Contrary to popular myth, Wall Street investors and analysts are not all brilliant financial wizards who make their choices based on complex spreadsheets, time-tested formulas and algorithmic investment analyses. Sometimes they just tell themselves fanciful stories about what they want to believe — and make gut calls once they’ve managed to convince themselves that the “story” is true.
Once the Netflix news broke, hype went into overdrive — especially on LinkedIn. Ostensibly a social media platform for professionals to connect with other professionals, the sad truth about LinkedIn is that it’s more like a virtual business convention with reams of blowhards overselling their meager credentials and shoving their electronic business cards in each other’s faces. Because just about everyone is keeping up appearances, it’s generally considered good manners to maintain the communal charade — which is why stinkers like yours truly get into trouble when they call out the “experts” on their unearned bloviation.
Take this one exchange out of dozens like it, which transpired in the wake of Netflix answering Paramount’s all-cash offer with an all-cash offer of their own on January 20:
And no — none of them have yet apologized to me. But hope springs eternal.
Meanwhile, to get behind the “story stock” hype, it’s important to remember that both Hollywood and Wall Street are in the storytelling business, especially when it comes to spinning stories about themselves. In fact, most of what gets reported in the media and the trades is curated corporate narrative, and as any movie buff knows, a narrative is only as trustworthy as the narrator. The better approach is to treat it like an old backstage musical from the 1930s. We’re sold a stage drama when in fact what we really want is a peek backstage — a look at the one thing companies aren’t legally allowed to distort: math.
Let’s break down a few graphs and see what story they tell us:
Chart 1:
Chart 1 shows the 20-year trend in price/sales ratio for five legacy studios — Warner, Disney, Comcast/Universal, Paramount, Sony Pictures/Columbia — and Netflix. The figures are calculated by dividing market cap by revenue, revealing how overvalued a company’s stock price is. Most studios are consistent throughout this period, with a market cap roughly double their revenue. All are studios with extensive and prestigious libraries going back as far as a century, combined with valuable studio lots, broadcast holdings and, in the case of Disney and Comcast/Universal, theme parks and resorts. Netflix has none of those things, yet exhibits an explosive growth completely disproportionate to how entertainment companies are historically valued. Disney peaks in 2020 at 5x revenue while Netflix has continued its rise, now trading at an astronomical 12x actual revenue. Some of this can be explained by Netflix’s pivot from a DVD rent-by-mail operation to a pioneering streamer between 2007 and 2011 when it began producing its own original content and was literally the only game in town. Subsequent and sustained overinflation of valuation relative to assets, however, defies logic. The general investor wisdom is that a company’s multiplier should reflect the number of years investors expect it to continue demonstrating strong growth. Given that Disney has been a successful brand name for over a century, a 5x valuation is extremely conservative — it’s a pretty solid bet that Disney will still be raking in cash in five years time. Netflix, on the other hand, has only been a streaming force for about 15 years, half of that time without meaningful competition. With a half dozen major competitors now chipping away at its market share while its domestic subscription base flattens, can we reasonably assume it will still be an industry leader 12 years from now?
Chart 2:
We get a bit closer to the mark in Chart 2 which shows the actual market cap itself over the same period of time. Here we see a fair correlation between market cap and price/sales ratio for all but Netflix which continues to see its market cap soar even as Disney and Warner decline post-Pandemic. We know the Pandemic was a boon to streaming operations as theaters shuttered and audiences stayed home, but Disney and Warner have streaming operations as well — and the impacts of the Pandemic have dissipated year-over-year since 2022 as box office has steadily begun to rise again. Clearly, there’s still more to the story.
Chart 3:
The plot thickens as Chart 3 reveals the depth of Netflix’s overvaluation by looking at straight revenue. While Netflix has enjoyed steady growth especially since 2015, Disney and Comcast/Universal — thanks to theme parks, network television operations, live sports etc. — have far more reliable and robust revenue. Even Warner, which exited the theme park business in 1998, shows more consistent year-over-year stability and higher revenue than Netflix.
Before we get to why Netflix is so grossly overvalued — pay attention to Netflix’s revenue since 2011. As the company’s streaming efforts ramp up, so do its revenues. It passes Sony in 2017 and remains sandwiched between Warner and Paramount until it passes Paramount in 2021 — even as Sony and Paramount revenues remain stable and consistent year-over-year. Current Netflix revenues position them just behind Warner and just ahead of Paramount. A merger that brings together HBOMax and Paramount+ — as David Ellison has announced he intends to do — will solidly beat Netflix’s revenue and secure a very impressive third place behind Disney and Comcast/Universal. While this would have no adverse impact on Netflix’s subscriber numbers, it would do deep and lasting damage to their narrative. Investors and analysts would be prompted to think twice about whether Netflix’s revenue really ought to be valued at 12x.
Chart 4:
In Chart 4, a new plot twist. A reliable way of evaluating a company’s fiscal fragility is by taking its net debt (total debt minus cash) and dividing it by EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). For instance, if you make $100,000 per year and have $50,000 in savings and investments, but you also have $50,000 on your car and $200,000 in college loans for a total debt load of $250,000, the Net Debt / EBITDA calculation would be net debt of $200,000 ($250,000 - $50,000) divided by EBITDA (your $100,000 salary) for a Net Debt / EBITDA ratio of 2. For companies, depending on cash flow, 2.5 to 3 is considered acceptable and healthy, meaning that if you allocated your entire gross earnings to paying off your net debt, it would take two-and-a-half to three years to do so. Cash flow, interest, overhead and other factors obviously extend that timetable, but the ratio is considered a good measure of overall company health and sustainability.
What Chart 4 shows is Disney, Comcast/Universal and Sony Pictures all safely in that healthy range for the past two decades, with only a minor spike during the COVID years. Warner sits between 5 and 7.5 until the AT&T acquisition in 2018 and then spikes to around 8 during COVID in 2019/2020 and stays there. This is an undeniably unhealthy ratio for a company like Warner which has been grappling for the better part of the past quarter century with debt issues that began soon after the ill-advised $164 billion AOL merger in 2000 and the AT&T merger in 2018. Paramount is the other interesting studio story here — with a healthy ratio only slightly above the other legacy studios but still below 5 until 2018 when it starts soaring year over year to its current ratio just shy of 15. Much of that can be chalked up to both COVID and the 2021 launch of Paramount+ which has since cost the company more than $1 billion annually in upfront costs and losses. In the wake of the company’s merger with Skydance, David Ellison has announced significant reorganization and cost-cutting to bring those numbers under control in the coming years.
The obvious outlier on Chart 4 is — again — Netflix. Thanks to their massive, debt-driven content strategy, Netflix’s ratio of 10 is already four times that of most other studios in 2005 and twice that of beleaguered Warner Bros. Five years later they’re at 15. Five years after that, in 2015, they’re at 20. Then it drops back down to 7.5 in 2016 and to an almost manageable 5 in 2017 because both Netflix management and Wall Street came to the realization that the previous trajectory was insane. What accounts for Netflix both coming to its senses and getting its fiscal house in order? Let’s look at Chart 4 again along with three new charts:
Chart 4 (repeat):
Chart 5:
Chart 6:
Chart 7:
Here we reach our denouement — and the story comes full circle. Netflix debt (Chart 4) correlates to its negative cash flow in the same period (Chart 5) relative to legacy studios, enjoying a spike in subscriptions around the same time (Chart 6) thanks to the emergence of Disney+ which helps boost streaming subscriptions for all platforms across the board starting in 2019. But only Netflix entertains a debt-driven content strategy (Chart 7), which makes it fundamentally unstable relative to its revenue. Incredibly — or perhaps not so incredibly — Wall Street continues to overvalue it.
To summarize:
Netflix is wildly over-levered compared to legacy studios.
Netflix’s revenue growth for most of its history has, unlike other studios, been funded by debt — the only revenue-to-debt-tethered company in the industry.
Netflix is the only “studio” that lacks real cash flow, assets, library value, diversified businesses or enterprise backstops and long-developed amortization structures.
Why, then, do analysts continue to value Netflix at an unjustifiable 12x revenue? In large part because they believe the turning point in Charts 4 and 6 above — where their debt spending comes under control just as their subscriptions explode — enable it to be self-sustaining, meeting its content costs while paying off its long-term debt. Even in such an enviably stable financial situation, however, the company’s 12x valuation north of $400 billion continues to make absolutely no sense. Consider a true tech comparison like Apple Computer which is roughly valued around 9x. Apple’s products — phones, tablets, computers and software — have become an indispensable part of people’s daily lives, and the scalability model works because increased production and sales do not devalue the product. Take away everyone’s iPhone or computer and they will be unable to function. Take away their Netflix subscription? The withdrawals would last as long as it takes to catch a breath of fresh air (or discover there’s such a thing as The Criterion Channel — but I digress). Apple can easily justify a 9x valuation because we know nine years from now, the company will still be a deeply integrated part of our daily lives. Can anyone reliably say that Netflix is worth 12x because they are certain that in twelve years, Netflix will still be a critical part of people’s lives? Is it even that relevant today?
Viewership for original Netflix content between 2022 and 2024 dropped from 56% to 40%, and the trend shows no signs of abating. Also consider that the platform’s highest performing shows over time are not its own flagship originals like Stranger Things — but rather licensed content like Grey’s Anatomy and Law & Order. Most damning of all is the fact that licensed content — not Netflix originals — now accounts for 60% of all viewership on Netflix, a complete reversal from just a few years ago. Even the reported growth of ad-tier subscriptions can’t close the gap as every streamer now offers ad-tiers and is witnessing the same shifts in subscriptions.
Despite all of Wall Street’s rosy projections, every trend line for Netflix is either static or moving in the wrong direction — its library has no demonstrable long term value, its brand is ill-defined, it has no other diversified business interests of note, no merchandising, no other avenues for exploiting or indexing the value of its “originals” — before or after streaming — and its market share is shrinking while its competitors — who all have richer libraries and more diversified revenue models — are ascendent.
When Netflix was essentially a pioneering monopoly, tech-level valuation was justifiable — analysts looked into the fiscal horizon and saw nothing remotely resembling an iceberg. Today, the icebergs are everywhere… and multiplying. Let’s then look into the future and try to see what Ted Sarandos probably saw when he and his team ran the numbers on a Paramount Global takeover of Warner Bros. Discovery:
Chart 8:
Chart 9:
Chart 10:
Chart 11:
In an instant, a combined HBOMax and Paramount+ surpasses Disney+ to become the largest legacy studio-backed streaming platform (Chart 8), closing in on Amazon Prime and putting it within striking distance of Netflix. At the same time, it dwarfs the others in content spend (Chart 9) — though a combined studio will likely seek savings by slashing streaming originals and redirecting those moneys to theatrical films in keeping with David Ellison’s priorities. The combined Paramount/Warner entity also comes out of the gate with annual revenue more than twice that of Netflix and roughly the same as other legacy studios (Chart 10) while also narrowly surpassing Disney for overall library value (Chart 11) and tripling Netflix’s overall and long-term library value.2 None of this means Netflix will not continue to be a player — it simply means the “story” that Netflix has sold Wall Street for the better part of the past 15 years — that it has the growth potential to justify a 12x valuation — will begin to fall apart and come back to earth. If you placed a bet that the hare would beat the tortoise by twelve lengths, the tortoise doesn’t even have to win — it just has to cover the spread.
This is the eventuality that seemingly sent Netflix into an eleventh hour panic and a defensive attempt to hijack the WBD deal by mortgaging 20% of their entire company. What they didn’t anticipate is that Wall Street would dent their valuation by another 20%, making it impossible to beat Paramount’s $31 per share offer without handing over as much as a third to half of Netflix just to preserve a market valuation which was already dropping because of “merger anxiety.” That would be like trying to extinguish a fire with gasoline. We obviously can’t get inside Sarandos’ head, but we can look at the numbers — and what the numbers suggest is that Sarandos never really wanted WBD, was never romantic about owning a studio, and was never really committed to theatrical movies. He was committed to preserving a hyperinflated valuation which has been the basis of the $50 million annual bonuses he and Peters have been awarding themselves for the past several years.
The Netflix “story” would have come to a crashing, cataclysmic ending — and Sarandos’ own personal fairy tale would have turned very dark, very quickly. As it stands, the Netflix story will still come to an end and the overvaluation is still going to eventually evaporate, but it’ll be a softer landing for which Sarandos and Peters now have time to prepare.
To appreciate the absurdity of a company as overvalued and unstable as Netflix acquiring a legacy studio like Warner Bros. — and why I was always certain the deal would fall apart — you would have to imagine a hot-dog cart operator trying to buy Whole Foods because DoorDash valued the cart like Microsoft. Except unlike Microsoft — or other studios whose library valuations are indexed to theatrical ticket sales — Netflix can’t monetize its original content anywhere but inside its own ecosystem via subscriptions, and has no objective way of indexing its library value. The subscription itself is a ticket to the ecosystem — the exclusivity justifies the price of admission. That was — and remains — a fragile foundation on which to base a 12x valuation.
Warner Bros. Discovery
Congratulations. If you’ve made it this far, this next section is a breeze.
“What the hell were they thinking?” can be asked of David Zaslav and the WBD board as well, except this is easier to deduce. For all the foggy claims by WBD board members that the Netflix deal was superior, on paper it never was. To obfuscate that fact, the Warner board threw up a lot of diversionary flimflam, like claiming they didn’t trust the Paramount offer without Larry Ellison’s “personal guarantee” (which he eventually provided), among other nonsense.
To appreciate why the Paramount offer was always superior, give a listen to Matthew Belloni’s The Town podcast and his December 18, 2025 interview with Gerry Cardinale, founder of RedBird Capital and fierce ally and partner of the Ellisons. Cardinale bluntly spells out the superiority of the Paramount bid, why the Netflix bid was unserious and why the Warner board was shamefully shirking their fiduciary responsibilities. Even better is Cardinale’s followup from March 5, 2026 where he offers up a healthy helping of “told ya so” and outlines precisely how and why the merged company will work. In neither instance, however, does Cardinale get into the thinking of the WBD board, copping to not being a mind reader. I, on the other hand, have no such professional or ethical constraints.
If you looked at the structure of the two deals, in broad strokes there was one critical difference: Netflix was offering to mortgage itself to pay for the acquisition — a true “merger” between two companies. The Paramount offer was a straight leveraged buyout (LBO) consisting of about 40% cash (from Larry Ellison and partners) and 60% debt which, in a fascinating twist, would be borrowed against the Warner Bros. Discovery assets after closing. Nonetheless, the key point there is that with a Netflix merger, the Warner brass — Zaslav and the WBD board members — would still be part of the resulting merged entity. If the Ellisons took over, their tenure would come to an end. Fiduciary duty notwithstanding, corporate board members are still human and disinclined to want to fire themselves. Even if the Paramount bid was better for shareholders — it seems a pretty good bet that the WBD board deduced it wasn’t better for them. In the end, the $31 per share Paramount offer swayed them not because they felt any better about it — it simply made it impossible a) for them to cook up more excuses and b) for Netflix to counter. Check and checkmate.
If you knew that your reputation was sullied by having helped orchestrate one of the most despised mergers in American history, making it unlikely anyone would want you on a corporate board ever again, would you choose the deal more likely to insure your ongoing employment? Or the one that would force you to hand over the car keys and head for the retirement home?
Final point on the WBD board — to appreciate the politics of this board, you have to look at the beleaguered history of Warner Bros. since the disastrous AOL merger back in 2001. Two years after the $350 billion deal that formed AOL Time Warner, the company was losing $100 billion per year and ended up splitting and radically restructuring. It hobbled along until 2018 when AT&T took another whack at the once great company, acquiring Time Warner for $85.4 billion in cash and stock, rebranding the resulting company as WarnerMedia, then tacking their own crippling debt onto the new company to the tune of $180 billion, the highest for a non-financial U.S. company at the time. When WarnerMedia then merged with Discovery in 2022, it didn’t just inherit a crushing debt load — it inherited “the AT&T Seven.”3 These were seven AT&T board members who retained their board positions following the catastrophic merger, subsequently assuming responsibility for weighing the Netflix, Universal and Paramount bids. While we do not know how these or any other board members voted on any of the deals they were presented, it’s not unreasonable to speculate as to motives. If you knew that your reputation was sullied by having helped orchestrate one of the most despised mergers in American history, making it unlikely anyone would want you on a corporate board ever again, would you choose the deal more likely to insure your ongoing employment? Or the one that would force you to hand over the car keys and head for the retirement home?
After a quarter century of mergers, debt, multiple rounds of layoffs, a revolving door of executives and a hailstorm of broken promises — it’s understandable that morale at Warner Bros. is dismal. I know — I have a lot of friends there. That they would be skeptical of David Ellison’s lofty dreams — even after a formal meeting in which he recommitted to those dreams — is understandable. They had high hopes with Zaslav, too. “He cried when he toured the lot,” one of them told me. “And he’s setting up in Jack Warner’s old office.” Alas, ‘twas not meant to be. Zaslav, it turned out, was always a traditional CEO, beholden to the “shareholder value” model that has held sway in American business since the 1980s. David Ellison? Let’s look at their respective statements after the Paramount deal was sealed (emphasis added):
David Zaslav: “Once our Board votes to adopt the Paramount merger agreement, it will create tremendous value for our shareholders. We are excited about the potential of a combined Paramount Skydance and Warner Bros. Discovery and can’t wait to get started working together telling the stories that move the world.”
David Ellison: “From the very beginning, our pursuit of Warner Bros. Discovery has been guided by a clear purpose: to honor the legacy of two iconic companies while accelerating our vision of building a next-generation media and entertainment company. By bringing together these world-class studios, our complementary streaming platforms, and the extraordinary talent behind them, we will create even greater value for audiences, partners and shareholders — and we couldn’t be more excited for what’s ahead.”
Did you catch that? Both talked about creating value — but not in the same way. Zaslav’s statement talks about creating value for shareholders, and nobody else. Ellison talks about audiences first, then partners — and shareholders last. These are prepared statements. They are vetted and approved internally. They are designed to send a message. Zaslav is talking to the people who have to vote on the deal to make it a reality. Ellison is talking to the people who will ultimately determine the new megastudio’s fate.
Paramount Global
Let’s wrap this out with an honest appraisal of the (presumed) victor. There was always going to be a certain amount of blowback against anyone who bought Warner Bros. because most people, present company included, would prefer that Warner Bros. remain independent. Most of us would also have preferred 20th Century Fox remain independent, and still hold out hope that Disney will one day allow the brand to thrive as a fully independent studio again — with or without Disney. While it’s hard to dispute that Warner has been a remarkable caretaker of the old MGM library it acquired in 1996 when it absorbed Ted Turner’s Turner Broadcasting (Ted Turner famously divorced the MGM library from the studio and studio lot after purchasing MGM/UA in 1986), it’s still a bitter pill to swallow for Hollywood history buffs. Then again, mergers and breakups have always been a part of Hollywood. United Artists and MGM were competitors for the better part of six decades before they finally merged in 1981. Warner was already key to one of the first and most significant studio mergers nearly a century ago when it absorbed rival First National Pictures. While Disney’s choice to rebrand 20th Century Fox into 20th Century Pictures (presumably to shed any affiliation with Fox News, which Newscorp still owns) has caught a certain amount of flack, it overlooks the fact that 20th Century Pictures was the studio’s original name when it was founded by former screenwriter and Warner production chief Darryl F. Zanuck and mogul Joseph M. Schenk in 1933 before merging with William Fox’s Fox Film Corporation two years later to create 20th Century Fox.
There are also the studios and near-studios that were, and then weren’t, oftentimes burning brightly — especially at the Oscars — before flaming out and being subsumed by someone else: RKO, Orion, DreamWorks SKG, Miramax, Open Road and many others. Mini-major Lionsgate may boast the most convoluted history of them all — a project that began in 1998 when “Lions Gate Films” was formed through a merger with Cinépix Film Properties (CFP), rapidly adding International Movie Group (IMG), Modern Entertainment, Redbus Film Distribution, Trimark, Artisan Entertainment and Summit Entertainment, all inside of 14 years. On the studio end, there’s Comcast/Universal’s perennial Oscar bridesmaid Focus Features, which was formed through a series of mergers and mashups including such bygone brands as USA Films, Gramercy Pictures, Good Machine, October Films, FilmDistrict, PolyGram Filmed Entertainment and its immediate predecessor and namesake, Universal Focus.
The truth is that such mergers and acquisitions are a critical part of Hollywood history. There would be no Hollywood without them — film libraries were built and distribution pipelines secured, much like how 19th century rail barons built their empires by acquiring the lines of competitors. Insofar as some have voiced fears of “consolidation,” it’s worth pointing out that there are no barriers to entry in the world of film distribution — all it takes is a checkbook and a little vision. Annual wide release independent films topped one-hundred a few years ago for the first time ever, and have remained there thanks to the likes of A24, Neon and Angel Studios. Taylor Swift didn’t even need a studio to put 2023’s Taylor Swift: The Eras Tour into over two-thousand screens — she just needed someone to make the call and cut the deal. Consolidation is a threat only where it drowns out lesser voices. In the world of film distribution, the only way independent voices are silenced is if they silence themselves.
For the most part, Ellison is dogged by skepticism and doubt, some of it well-founded, much of it pure, unsubstantiated paranoia. I’ll address the most widely circulated questions one by one:
How can Ellison possibly hope to release 30 films per year?
Contrary to the blather now circulating on platforms like LinkedIn, Ellison’s commitment to release 30 films into theaters from the combined Paramount/Warner megastudio is not exactly reaching for the stars. It’s mind-boggling how people who have no qualms about Netflix producing more hours of “content” every month than any human being can reasonably find, much less watch, suddenly deem it shocking that we might migrate back to a time when 30 films from two studios was the norm. For comparison, Warner Bros. alone averaged more than 20 films a year from 2000 right up through 2019 when the COVID-19 pandemic struck. Paramount averaged over 15 annual releases from 2000 through 2012. What Ellison is proposing isn’t some unprecedented ideal — it’s a plan to restore what was, until about ten minutes ago, the accepted status quo. Furthermore, the assertion that the marketplace cannot support the competition, that too many big movies will “cannibalize” each other — as one data-challenged LinkedIn rocket scientist attempted to assert — is easily disproved. We covered this myth extensively in our July 2024 interview with former National Association of Theater Owners President John Fithian and his The Fithian Group partners Patrick Corcoran and Jackie Brenneman. Later that same year in a column for Variety, Patrick reaffirmed the longstanding fact that moviegoing begets moviegoing, and that the solution to fixing Hollywood’s woes is to simply make and release more movies. If you build it — they will come. Backing up her former colleague, Jackie Brenneman — recently elevated to CEO of the Independent Film & Television Alliance (IFTA) — weighed in on LinkedIn to add her two cents and help set the record straight:
How will Ellison handle the combined company’s huge debt load?
If you’re thinking like a traditional Wall Street investor, that’s a valid question. For the Ellisons, it’s not. Sometimes people overpay for a thing because it means more to them. Sometimes it’s not about the money. Maybe — just maybe — the reason the Ellisons won is because they see movie studios not as investments but as heirlooms. I obviously can’t speak for either Larry or David, but I can speak as a father. It may not factor into anything they teach at Harvard Business School, but it seems pretty clear to me that Larry Ellison loves his son, and David Ellison loves movies. Once you understand that — you understand the deal and the debt they incurred to seal it.
That’s not to say the combined Paramount-Warner won’t have extremely large debt payments out of the gate — Ellison will have no time to waste delivering commercial success to meet those payments. At the same time, its ownership structure makes it immune to Wall Street pressure to meet specific debt targets and milestones to preserve analyst ratings and recommendations. As long as the company is comfortably in the black, Ellison is highly unlikely to care much about Wall Street’s opinion of its share price. Think of it as the difference in debt pressure between a 30-year low-interest rate mortgage and a 5-year high-interest rate business loan. That means Ellison’s promise to not resort to further layoffs is likely closer to the mark than many may realize. The layoffs that ensued following the Paramount-Skydance merger resulted from redundancy between two companies that were being folded into one, as well as the fact that Paramount had not already pruned itself in the wake of many difficult years. Warner, conversely, is not being folded into Paramount (apart from merging streaming operations, Ellison intends to run them as separate entities) and has already undergone multiple rounds of crushing layoffs over a period of several years in clear preparation for a sale.
Granted, it only takes a few costly bombs on the scale of The Bride or Joker: Folie à Deux to put the screws to Ellison’s ledgers and bring layoffs back into the conversation — but that’s an “if” not a “when” proposition. If it were to happen, it would be as a last resort, and many years down the line.
How can two rival studios be made to co-exist under the same tent? Doesn’t Disney’s fraught acquisition of 20th Century Fox bode poorly for Paramount-Warner?
Not really. Disney never had any intention of running two studios — it made that clear from the outset. It was more interested in 20th to bolster its library and juice its offerings on Disney+. Ellison and his team are committed to theatrical exhibition. The two studios also have a history of working together. This past January, before the current deal was sealed, The Hollywood Reporter ran a story recounting the first time a hostile Paramount takeover of Warner Bros. was attempted back in 1922 when Paramount mogul Adolph Zukor tried to outmaneuver the original Warner brothers themselves — and failed. By the 1980s, however, the companies had become partners — jointly buying into the Mann Theatres chain as minority owners. I was an employee of Mann Theatres at the time and became accustomed to seeing Paramount and Warner Bros. executives on a regular basis, taking a keen interest in how their tentpole films were opened and received at the chain’s flagship locations, including the now-demolished Mann’s National where I worked and the nearby Mann’s Village, both in Westwood, California. Among the many Warner and Paramount classics that we premiered at the National just in 1984: Footloose; Greystoke: The Legend of Tarzan, Lord of the Apes; Indiana Jones and the Temple of Doom; Clint Eastwood’s Tightrope and Eddie Murphy’s Beverly Hills Cop.
Those were golden days for both studios, who collaborated fruitfully as minority owners of Mann Theatres until 1986 and 1987 when they partnered to purchase the chain outright. Ten years later they sold it to WestStar Cinemas, only to buy it back after three years when WestStar declared bankruptcy. Though they finally dissolved the partnership and divested themselves of all exhibition holdings in 2011, they had spent the better part of four decades forging a relationship in which they were more partners than rivals, making and releasing movies independently but working jointly in the exhibition space because they understood that if one thrived — the other thrived. They understood that they had complimentary libraries, brands and management styles. If anything, their complementarity has only increased over the ensuing decades.
But won’t the Ellisons be Trump’s stooges? Aren’t they too close to Donald Trump?
If I had a dime for every one of my friends who palpitates and grows short of breath at the panicked utterance of some variation of the above. The usually sensible Steven Zeitchik of The Hollywood Reporter memorialized his personal panic in December while David Ellison was still in hostile takeover mode. The concern appears to hinge on a handful of circumstantial incidents, decisions and rumors rather than anything concrete:
The $16 million settlement of a lawsuit filed by President Trump against CBS (which Paramount owns).
The termination of Trump critic Steven Colbert’s The Late Show with Stephen Colbert at the end of the current season on CBS.
The temporary axing of a 60 Minutes piece about deported Venezuelan immigrants by new CBS News chief Bari Weiss.
Larry Ellison’s personal history as a supporter of President Trump and friend of Israeli Prime Minister Benjamin Netenyahu.
David Ellison’s recent invite to the State of the Union address (as a guest of South Carolina Senator Lindsey Graham, not the President).
The brief involvement of President Trump’s son-in-law Jared Kushner and his Affinity Partners in the first stage of the Paramount Global bid to acquire Warner Bros. Discovery.
The large percentage of sovereign wealth fund money from Saudi Arabia, Qatar and Abu Dhabi which remains central to the WBD deal.
My absolute favorite red flag, however, is the rumor floated first and exclusively by Semafor — based on a single, anonymous source — that it was Trump’s fondness for ‘80s and ‘90s era action movies that pressured David Ellison into greenlighting Rush Hour 4, to both scratch Trump’s itch for action nostalgia and get his disgraced director pal Brett Ratner — director of the previous three Rush Hour movies as well as the recent Melania documentary about the First Lady — back in the game. That Ratner is also a former business partner of Trump’s previous treasury secretary (now a Lionsgate board member) Steve Mnuchin in the now defunct financing/producing endeavor RatPac Entertainment seems to also play a part.
It would be naive to pretend that business deals of this scale don’t have a political dimension — once again, Ted Sarandos was literally in Pam Bondi’s office when news broke that the Paramount offer had been accepted. It was also suggested early on that Sarandos’ and Reed Hastings’ history as major Democratic Party donors, their exclusive Netflix deal with the Obamas and the presence of former Clinton, Obama and Biden staffer Susan Rice on the Netflix board would doom the deal with Trump antitrust officials — who would obviously be more favorably inclined to an offer backed by a Trump donor like Oracle founder and mega-billionaire Larry Ellison. In the end, however, no such showdown transpired — it simply came down to money, and Paramount and the Ellisons played the shrewder (and costlier) card. No less than Sarandos himself put contrary rumors to bed, asserting that political pressure from the White House played no part in the bidding war for WBD.
At the same time, with the lone exception of the Semafor rumor, the roster of concerns outlined above are all based in fact. The only question is whether they constitute undue influence and illegality. The clear answer is that they do not, and there is no evidence beyond the circumstantial that they ever will. That’s small consolation to those who trust neither Trump nor the Ellisons, but until David Ellison’s stated commitment to CNN editorial independence is shown to fall short — the evidence base for such fears is simply not there.
A bit of historical perspective may help lower the collective blood pressure. Studio moguls and presidents have always been cozy — no less a hardened Republican than Jack Warner crossed party lines to support the election of Franklin Delano Roosevelt (with whom he often fought) by loading his biggest stars onto a promotional transcontinental train scheduled to coincide with FDR’s March 1933 inauguration. The Clinton and Obama years were synonymous with Hollywood fundraisers sponsored by nearly everyone in town, most notably the “SKG” in DreamWorks SKG: Steven Spielberg, Jeffrey Katzenberg and David Geffen, all of whom had regular access to their favored presidents without so much as a rumor of a rumor that there was any quid pro quo. It’s also easy to forget that Fox News founder Rupert Murdoch — arguably one of the most partisan and incendiary figures in American media history — owned 20th Century Fox for more than two decades, concurrent with the rise of Fox News, during which time creative decisions were left entirely to studio brass, free of Newscorp interference.
Based on what we know about the Ellisons specifically, we can make a certain number of reasonable assumptions about how the combined Paramount-Warner entity will operate:
Larry Ellison has never shown any interest in media or entertainment unless his children — who are passionate about movies — ask for his help. He has been a principal investor in daughter Megan Ellison’s Annapurna Pictures since its founding in 2011 — at least partially underwriting many of the films that earned her four Academy Award nominations for Best Picture, including one for Phantom Thread, written and directed by recent triple-Oscar winner Paul Thomas Anderson (for One Battle After Another ). When the company ran into debt problems in 2019, he stepped in to help straighten its finances but sought no role whatsoever in creative decisions. He was also a principal financier for David’s Skydance Media — again, without seeking a role in creative decisions. Given his past behavior, there is no reason to believe that Larry Ellison’s underwriting of the Paramount Global and Warner Bros. Discovery purchases will be any less hands-off.
David Ellison has been a known quantity and active producer in Hollywood for over two decades, beginning with the World War I fighter pilot drama Flyboys (2006) which he produced and partially funded with family money after dropping out of USC film school. He has produced or executive produced over fifty feature films (and more for television) including eight collaborations with Tom Cruise (five Mission: Impossibles, two Jack Reachers and the megahit Top Gun: Maverick), the Coen Brothers’ True Grit (2010), World War Z with Brad Pitt (2013), two Star Treks, two Terminators, one Transformers, a Spy Kids and Ben Affleck’s acclaimed 2023 drama, Air. Like his sister, David Ellison is not hard to figure out — their filmographies reflect their personalities and passions. Neither got into the film business for fame, power or profit — their tastes are divergent, but their love for the art and craft of filmmaking is true. Like his father, there is no indication that David Ellison will suddenly become someone other than the person everyone has known him to be for the past twenty years.
Even if all that is true, some will argue, the wild card is Trump — a transactional president with the power of the presidency to make demands and extract compliance. Assuming such concerns are valid, the only report we have of any such arm-twisting is the Semafor story — which would have us believe that Paramount’s green light of Rush Hour 4 constitutes a fearsome abuse of executive power. Personally, I give the Semafor story as much credibility as a Bigfoot sighting — but for the sake of argument, let’s assume it’s true and Rush Hour 4 is indicative of how Trump will exert executive authority over the Ellisons and their new media empire. If that’s the benchmark, then we’ve got nothing to worry about — because it can’t possibly be worse than Rush Hour 3.4
Because I’m fair-minded, I’ll acknowledge there are those out there with more sensible, data-based skepticism like media analyst Evan Shapiro. Shapiro is a smart guy and I highly recommend his Substack along with Entertainment Strategy Guy, Ted Hope, Stephen Follows, Roy Price and Justine Bateman for strong, analytical, non-hysterical, forward-thinking, outside-the-box takes on the future of the business. Shapiro recently got hold of Ellison’s investment deck and has some extremely cynical things to say about it. Shapiro isn’t questioning the wisdom of the deal or even Ellison’s vision — he questions whether the contours of the deal make sense given the incredibly rosy forecasts Ellison and Redbird Capital are using to justify it. As I noted above, the company will need some big hits out of the gate to offset its debt payments, so Shapiro’s skepticism is not entirely unjustified. From a classic capital markets standpoint, if you’re just looking at the deal and going off of history and precedent, it can look like a big bucket of over-optimism. Ellison, however, has been clear — while he intends to “reinvent” the business, he’s not reinventing the wheel. Everyone pretty much agrees the wheels were already starting to come off even before COVID. Just putting them back on and returning us to the glory days of 2019 would be an achievement — and it shouldn’t even be that hard. There’s no doubt that Ellison’s track record as a producer is spotty — but he was also the primary architect of Top Gun: Maverick, which he first proposed to the late Top Gun director Tony Scott in 2010. Twelve years later, it became the first post-pandemic blockbuster, earning over $1 billion globally to become Tom Cruise’s most successful ever film, and prompting Steven Spielberg to declare that “Top Gun: Maverick might have saved the entire theatrical industry.”
If box office and production were still at pre-Pandemic levels, Shapiro’s skepticism might have more merit — but when you’re at Days of Wine and Roses levels of rock bottom, you don’t need to be the smartest person in the room — you just need to be the one who admits it’s time to lay off the bottle and get sober.
Another skeptic is veteran producer Joseph M. Singer, best known for a streak of hits during the ‘90s including Courage Under Fire (1996), Daylight (1996), Dante’s Peak (1997) and Eddie Murphy’s Doctor Dolittle (1998). In a lengthy diatribe for Deadline, Singer outlines the case against the merger for which he has already actively lobbied regulators in Washington D.C. Singer’s arguments, however, simply ignore the facts as outlined above. He gives the game away when he says:
I was an investment banker in the 1980s. I am a 30-year veteran of the motion picture industry. I have been a studio executive, producer and co-financier. I have been involved in more than 120 major U.S. studio films that have grossed more than $26 billion in theatrical alone.
My somewhat unusual combination of financing and creative experience and expertise gives me a unique perspective that I believe is important in commenting on the potential Paramount acquisition of WBD.
Singer also hasn’t produced a picture in over 25 years. That’s not a slam on him — but it does suggest he’s still living in a very different era and applying that era’s metrics. He is also clearly not considering the possibility — once again — that the Ellisons want Paramount and Warner as heirlooms… not investments. That doesn’t give them license to be reckless — but it does mean they’re in it for a much longer haul and likely to take bigger risks than someone of Singer’s background is wired to understand.
Lastly, there’s Cinema United, formerly the National Association of Theater Owners (NATO), which rebranded a year ago to address the obvious confusion about which many of us have joked for decades. There’s no joking about their objections to the Paramount-Warner deal, however, which they distrust only slightly less than the Netflix deal (which they absolutely hated). Like the Teamsters, their objection appears to be largely conditional — if given assurances that consolidation will increase competition, increase film inventory and benefit production and jobs, they will likely back down.
Looking Forward…
Obviously, my crystal ball is no better than anyone else’s — but I’ve no trouble going out on a limb and saying that there are more reasons to be hopeful than not.
Trigger warning: more charts and graphs to follow, because it’s the only way to call out what everyone else has overlooked. Bear with me — it’s worth it and it’ll all make sense in the end.
Regular readers of this Substack already know my thoughts regarding the three major index funds which now control an obscene percentage of the global economy: BlackRock, State Street and Vanguard. Together they manage an almost incomprehensible $28 trillion in assets, with BlackRock’s $13 trillion portfolio accounting for nearly half that figure. Vanguard comes in just behind with $11 trillion in assets while State Street brings up the rear with a measly $4 trillion. For comparison, the United States in fiscal year 2025 spent just over $7 trillion. U.S. national debt, accrued over many decades, stands at $39 trillion. U.S. GDP for fiscal 2026 is expected to be between $30 trillion and $32 trillion, which is roughly 25% of the entire global economy. That means three funds and a relatively small quasi-cartel of fund managers oversee a portfolio which is nearly the same size as the entire American economy and four times the size of the nation’s annual budget — or 20% of the global economy.
On paper, there’s nothing inherently nefarious about these funds. Structurally, index funds are more transparent and secure than hedge funds or mutual funds because they deliberately tie themselves to such indices as the S&P 500 or the Nasdaq (hence “index” funds). For the better part of two decades, beginning in the 1990s, their role in the economy was unremarkable — one of many investment vehicles into which investors could park their money. In the wake of the 2008 financial crisis, however, gigantic capital flows were redirected to these “Big Three” funds as they steadily acquired a significant stake in nearly every major enterprise and multinational on the planet including a substantial stake in each other. To be fair, the funds can’t be faulted for being victims of their own success — at a time of global financial turmoil, they were lifeboats. The issue is not so much their size but the power they derive from a combination of size and the retention of “governance rights” over the investments they manage.
As Big Three index fund ownership in and influence over Hollywood has increased, studios (and streamers) have spent exponentially more money on fewer original films to sell fewer tickets to a rapidly diminishing audience.
Under normal circumstances, fund managers voting for CEOs and corporate board members as proxies on behalf of their investors isn’t a big deal. Millions of ordinary working people have their nest eggs invested in funds — be it a 401k, a pension fund or a mutual fund — and cannot be expected to have the time or the know-how to involve themselves in the corporate decisions to which their shares entitle them. Fund managers, on the other hand, are paid handsomely to know what they’re doing and to assume that responsibility on behalf of investors. When a fund grows to where its governance rights aren’t simply influencing the management of individual companies but rather shaping and directing entire sectors of the national or global economy — at that point it’s incumbent upon Congress and the SEC to step in and make adjustments accordingly. That they have repeatedly failed to do so is what has landed us in our current predicament, with enormous power now residing in the hands of very few to exert disproportionate influence over economic decisions impacting the lives and livelihoods of billions. When then-Disney CEO Bob Iger defeated activist investor Nelson Peltz’ proxy fight in April 2024, it was in no small part thanks to the support Iger received from BlackRock. Anyone openly wondering at the rapidity with which “stakeholder capitalism” took hold across the entire globe, successfully peddling such ideas as ESG (Environmental, Social and Governance), DEI (Diversity, Equity and Inclusion) and corporate climate initiatives, one need look no further than the index funds where these priorities originated.
Why is this relevant? Because as the Big Three index funds have exponentially grown their Hollywood investments over the past two decades, Hollywood has seen its fortunes and its cultural relevance just as steadily disintegrate:
The five charts above outline several clear 25-year trends:
Chart #1 shows the share of long-term U.S. fund assets held in index mutual funds and exchange-traded funds (ETFs), based on Investment Company Institute (ICI) reports. There is some interpolation here, but the broad trend line is accurate and, most importantly, correlates with the growth of Big Three index fund investment in the entertainment sector.
Chart #2 uses data from The-Numbers.com (Nash Information Services) to chart the collapse in annual box office ticket sales.
Chart #3 uses data from BoxofficeMojo.com and other public sources to chart the percentage of films in the annual domestic box office top 10 which are sequels, remakes, reboots, or franchise-based titles.
Chart #4 relies on news reports and estimates, as budgets are rarely accurately reported, but we can assume a reasonable degree of accuracy in the trend line that charts the average estimated production budgets of top-grossing films as compiled from The-Numbers.com, BoxofficeMojo.com and various industry trade reporting.
Chart #5 sources information from The-Numbers.com to reflect the total number of wide releases each year from the six major studios: Warner Bros., Disney, 20th Century (pre-2019 Disney acquisition), Paramount, Sony/Columbia and Comcast/Universal.
The take-away? As Big Three index fund ownership in and influence over Hollywood has increased, studios (and streamers) have spent exponentially more money on fewer original films to sell fewer tickets to a rapidly diminishing audience.
These trend-lines further correspond to every other metric being cited in Hollywood’s five-alarm fire: collapsing Oscar ratings, vanishing jobs and fewer shoot days in Los Angeles, California and the United States generally. Some blame streamers, but it’s a bigger story with more complex and interrelated causes.
It bears emphasizing that The Big Three index funds and their massive investment in Hollywood did not precipitate the industry’s decline — there’s a whole series of cascading factors that combined to create the domino effect which now threatens the entire business. The most justifiable starting point would likely be the collapse of the DVD market between 2003 and 2008, during which we saw the “midnight massacre” of major studio specialty divisions in 2005 and 2006, followed by the 2008 financial crisis, the demise of more independents between 2008 and 20105, the rise of streaming between 2011 and 2015, the COVID-19 Pandemic in 2019, and, finally, the 2023 SAG and WGA labor strikes. The inevitable result of these pressures has been a years-long contraction in production, numerous rounds of layoffs across all major studios and the steady flight of production out of Los Angeles, out of California and finally out of the United States with tens of thousands of Los Angeles-area jobs lost just since 2024. If anything, the rise of the Big Three grew out of the general financial uncertainty of the moment as global capital flows sought safe havens. Correlation, as is often pointed out, is not causation — but correlation can be predictive of future outcomes.
That brings us back to the Ellisons, Paramount and WBD. The historic shift in ownership of both Paramount and, if the remaining regulatory stars align, WBD, unravels a big piece of that correlation which — despite fears of “consolidation” — may well be the panacea Hollywood has sought since at least the 2008 financial crisis.
Let’s look at the seven major media companies and how much of their institutional block is held by the big three index funds:
The graph above shows the percentage of overall institutional control that belongs to the Big Three index funds for each of the eight major Hollywood media companies: Warner Bros. Discovery, Comcast/Universal, Disney, Netflix, Amazon, Apple, Paramount-Skydance and Sony/Columbia. Together, BlackRock, Vanguard and State Street control more than a third of the shares held by institutional investors in Apple and Warner Bros. Discovery, and more than a fourth of those for Comcast/Universal, Disney, Netflix, Amazon and Paramount-Skydance. The only company whose block of institutional shareholders is not effectively under the control of the Big Three index funds is Sony.
That begs the obvious next question: Just how powerful is the “institutional block” for each of these companies?
This is where things get really interesting.
When we add non-institutional investors back into the picture, we see the degree to which they dilute the power of institutional investors. This is typically where entertainment companies find space for managerial independence. Institutional investors — hedge funds, pension funds, index funds, mutual funds — are typically far more engaged (meddlesome) and conservative (risk-averse) than non-institutional investors because they’re accountable to those whose lives and futures depend on them. They’re also more prone to groupthink, which disproportionately empowers the largest shareholders in the institutional block — typically the Big Three index funds. The greater the power of non-institutional investors, the more diluted the institutional block (and, by extension, index funds), thereby granting company management greater latitude to embrace the kind of risk-taking with which Hollywood has historically thrived.
The chart above shows that dilution essentially negligible for all but Paramount-Skydance and Sony. With index funds holding between 20% and 25% overall control of Warner Bros. Discovery, Comcast/Universal, Disney, Netflix, Amazon and Apple, and the overall institutional block of those companies hovering between 66% on the low end and nearly 90% on the high end, the odds of management embracing risk and elevating original voices stands somewhere less than zero.
Which brings us to Paramount-Skydance and Sony where a whopping 72% and 92% of shares, respectively, are held by non-institutional investors. What allows each of these two companies to enjoy relief from index fund control and pressure, however, is quite different:
Sony, being a true multinational corporation, has a broadly diversified ownership structure which includes a vast number of foreign institutions as well as Japanese institutional ownership which is typically allocated to its “non-institutional” float for American analytical purposes. On the right side of the chart above, we see that Sony in global terms is still very much institutionally controlled — it’s simply globally diversified to where the American block and the Big Three index funds are unable to exert control. That’s a healthy investment structure and a key reason why Sony has remained one of the more independently-minded and traditionally creative of the major studios — because it’s still structured like a studio from the 1980s. That it doesn’t make better choices creatively is a function of current management culture, not institutional shareholder pressure. We’ll get back to that in a moment.
Then there’s Paramount-Skydance, which has a truly non-institutional “public float” of 71% of which the Ellisons, through their control of National Amusements Inc. (NAI), control 100% of the voting shares. How precisely does that work? You can credit the diabolical genius of late Viacom mogul Sumner Redstone who set it up that way — and which appears to be a key reason why the Ellisons went after Paramount first and Warner second. Paramount represented a once-in-a-generation opportunity to take control of the last major Hollywood studio not governed by dispersed public shareholders — opening the door to extend that control to all other subsequent acquisitions, potentially creating something unseen in generations: a family-owned media empire operating at global scale with accountability only to the passions and dreams of its owners.
The above chart outlines why the appeal of Paramount was likely never just the asset. It was the structure. Because American securities law allows the creation of different classes of stock — in this case voting stock versus non-voting stock — it’s possible for minority shareholders to be controlling shareholders by virtue of owning more voting stock. You’re right now probably thinking, “But that’s undemocratic!” That’s right. It’s not. Democracy is a political ideal. Securities law allows the powerful to invent their own ideals and write their own rules. Redstone’s genius was to make sure his minority ownership of NAI — his family company — included enough voting stock to give him absolute control. Redstone then did something rare in American business, applying the same trick to NAI’s ownership of Paramount Global: minority equity offset by control of voting shares. This incredibly unique application of dual-class shares allowed Redstone to build and maintain an empire with a level of control far exceeding his economic stake, and enabling him to exert near-absolute control from a relatively small equity position.
This is spelled out in the first four bars (“Redstone Playbook”) of the chart. The first bar shows NAI’s ownership of the public float at just under 10%, while the second bar shows NAI’s control of voting shares at over 77%. The third and fourth bars show the same breakdown of NAI shares and control: Redstone with 25% of the equity but over 80% of the voting shares. If you know anything about Florentine history — that’s Medici level genius.
At the same time, Redstone’s control — for those who followed the family drama that began during his ownership and continued in the succession battle after his passing (which was eventually won by his daughter, Shari) — was not without complications. Simply owning a majority of voting shares doesn’t mean you can ignore your fiduciary responsibility to the non-voting shareholders who hold a majority of the equity, either in Paramount Global or NAI. Redstone still had to make sensible decisions to forestall the possibility of shareholder lawsuits.
The four bars on the right side (“Ellison Structure”) show how the Ellisons adopted the Redstone model and then adapted it to their own goals. To bypass the need to address “fiduciary responsibility” to a majority of NAI equity shareholders, the Ellisons didn’t just buy out the Redstone family’s voting shares in NAI — they bought out a majority of all equity shares in NAI so their overall equity ownership of NAI is now at over 77%, (bar 7) giving them 100% voting control of NAI (bar 8). That gives them 100% control of all voting shares in Paramount Global (bar 6), which allows them to exercise absolute, unchallenged control of an entity in which NAI only has a 3% equity stake (bar 5).
What about the people who own 97% of the rest of the public float which constitutes nearly 72% of the total ownership of Paramount Global? Yes, the Ellisons do have a fiduciary duty to them — but unlike institutional investors, the non-institutional block is a pretty disorganized lot, typically too fragmented for a serious block of opposition to emerge. Most are routine traders whose shares will change hands many times over the years. By controlling all voting shares in both NAI and Paramount Global, and by controlling three-fourths of the equity in NAI, the new Paramount-Skydance represents the most absolute control any one individual or family has exercised over a single studio since financier Marvin Davis ran 20th Century Fox as his own private empire from 1981 to 1985.
Here’s the bigger kicker: because Paramount-Skydance is now acquiring Warner Bros. Discovery — not through a Netflix-style stock-swap merger, but in a leveraged buyout — existing WBD shareholders (assuming they vote to approve the deal on April 23) will effectively allow themselves to be bought out completely, handing full control of WBD to the Ellisons in the same way they presently have full control over Paramount. The Ellisons have also put to rest any concerns regarding the influence of their Middle Eastern sovereign wealth fund partners, underlining that all such partners have agreed to forego governance rights, handing the Ellisons total and absolute control over the combined enterprise.
Furthermore, unlike Marvin Davis, David Ellison is a seasoned producer and experienced filmmaker. Once upon a time, that was actually the norm — Walt Disney, Robert Evans, David Puttnam, my former professor Peter Guber and his partner John Peters, Joe Roth and Sherry Lansing are just a few of the acclaimed creative producers who ran studios in prior decades. Save for Walt Disney, however, all of them had to answer to higher authorities, and Disney’s absolute creative freedom as producer-owner ended in 1940 when he took the company public.
That makes David Ellison an extraordinary throwback to an era that predates all of us — when true producer-owners like Sam Goldwyn and David O. Selznick exercised total fiscal and creative control to do whatever the hell they damn well wanted.
Wade! That’s crazy-pants! Are you seriously comparing David Ellison to Sam Goldwyn and David O. Selznick?
Not exactly — but it’s also not quite as crazy as it sounds. Present studio leadership isn’t exactly one for the ages, either. Larger-than-life moguls of yesteryear like Goldwyn, Selznick, Zanuck, Zukor, Jack Warner, Louis B. Mayer or even a creative executive on the order of an Irving Thalberg would have found it virtually impossible to work under the constraints outlined above. The truth is that the influence of institutional investors and the power of risk-averse index funds like the Big Three means today’s studio chiefs are more likely to be administrative placeholders than visionary risk-takers. As I have previously pointed out, when you visit the Sony Pictures lot in Culver City, in the lobby of the Irving Thalberg building are glass cases displaying all twelve of Columbia Pictures’ record-tying Best Picture Oscar statuettes (only United Artists has also won twelve). It’s an impressive display until you realize that the studio hasn’t won a Best Picture since 1987 — when it was still simply Columbia Pictures and David Puttnam was studio chief. Two years later, Sony purchased the studio. Take that as a caveat — we can celebrate Sony’s relative independence from the Big Three index funds, but without strong studio leadership to take a stand for creativity, corporate governance will still push the opposite direction.
Of the eight major media companies, six are effectively governed by the institutional ownership and pressure of the Big Three index funds. When the Paramount-Warner deal closes, that number will drop to five and those on the independent side of the ledger will increase to three (based on Ellison’s commitment to run Paramount and Warner as separate studios). If executed correctly, that simple shift promises to be more impactful than any other acquisition or merger in movie history at the very time when the industry most needs an impactful shakeup. Time will tell whether the Ellison gambit is successful — but for the for the sake of argument, let’s consider what the past ten years might have looked like if the merger had happened earlier.
The charts below compare the companies in which the Big Three have a controlling stake, and those in which they do not, on two different timelines: the actual past decade and an alternative history in which Warner shifts to the other side:
Across the top row are comparisons of Big Three index fund-controlled companies (in blue) against those which are not Big Three-controlled (in green) in three different metrics from 2015 to 20256: Box office share, streaming subscriptions, and linear television penetration. The bottom row shows what that history would have looked like with Warner Bros. shifted to the “non-index” side of the ledger. This furnishes a raw estimate of how a Paramount-Warner merger could conceivably impact studio decision-making going forward.
The most predictable and pronounced impact is on box office. The real-life 42% gap between index-controlled companies and non-index companies becomes an 11% gap in our alternate scenario. Where real-life streaming subscriptions among non-index platforms are only 10% of those of index-controlled platforms, the alternate scenario more than doubles that figure to 25%. Finally, where linear television networks owned by non-index companies penetrate roughly 160 million fewer households than those owned by index-controlled companies, the alternate history rebalances that deficit and slashes it in half to just under 80 million.
That’s the impact of a hypothetical rewrite of the past decade using the existing Warner numbers under the dysfunctional leadership of AT&T and Discovery. If we assume a more aggressive posture going forward, with David Ellison able to meet the production goals to which he has committed both Paramount and Warner — those numbers are certain to go up, potentially creating a ripple effect across the entire business. If there’s a constant in Hollywood history — from sound to color, widescreen, home video, digital projection — it’s that when one company takes risks that pan out, others follow suit because it’s no longer a hard sell to shareholders and analysts. In fact, we’re already seeing that trend pan out — much sooner than expected. Two weeks to the day after the sealing of the Paramount-Warner deal, Universal announced it would reverse its COVID-era contraction of release windows and restore the 45-day window for major releases by 2027. Two days after that, Tom Rothman — Chairman and CEO of Sony Pictures and one of the last true old school producer/executives — wrote a remarkable open letter to the New York Times, declaring his love of movies, their critical role in our lives (and his family’s) and throwing his support behind a renewed effort to expand theatrical windows. Add in a new CEO at Disney in Josh D’Amaro who won’t want to be left behind in any broader movement to reinvigorate theatrical releases and the stage is set for real theatrical renaissance the likes of which the industry hasn’t seen since the last time it needed one in the 1970s and ‘80s.
As if to underline the point, no less than Amazon MGM Studios — previously a timid player in the theatrical market and a frustrating underachiever in streaming — is presently experiencing its biggest ever hit in theatrical release. As of this writing, Project Hail Mary has just passed a global gross of over $500 million.
I outline all of this to underline that optimism is warranted — though success is anything but guaranteed. As Project Hail Mary star Ryan Gosling rightly pointed out:
Here we are, we’re all back in theaters. It’s not your job to keep them open, it’s our job to make things that make it worth you coming out.
Yes, Ellison has to deliver. Yes, others will need to follow his lead — and they, too, will have to deliver. But none of this is new. What has dogged the industry for the past two decades of decline hasn’t been an inability to see the structural problems. They’ve been written about ad nauseum. Even now there’s no shortage of ideas on how to address them. The problem isn’t know-how or even will. The problem has been concurrent structural change at the corporate level that has made it increasingly difficult to respond swiftly and creatively to market shifts as they occur. Diversified shareholder influence once enabled Hollywood to act boldly, swiftly and creatively to take risks and address dynamic market conditions. The hegemonic shift to institutional ownership concentration and Big Three index fund domination crippled that agility at the very moment it needed to become more agile.
The Ellison acquisitions of Paramount and Warner promise to break that logjam and reverse that trend. Not only is no other studio presently structured in such a way as to be able to tolerate the kind of risk that’s required to restore Hollywood’s greatness — no studio in history has been structured to be this agile. The only question is whether David Ellison has the vision and the courage to make the tough calls — and the right calls.
Given what he and his family have risked at this critical time for the industry — at a minimum, David Ellison deserves the benefit of the doubt, if not the industry’s unwavering support.
YouTube Revenue ($60B): Based on Alphabet’s 2025 Full-Year report, which breaks out YouTube’s combined ad and subscription revenue.
Netflix Revenue (~$44B): Based on Netflix’s Q4 2025 investor letter and Business of Apps historical tracking.
Netflix Upfront Spend ($18B): Confirmed by Netflix CFO Spencer Neumann regarding 2025 cash content outlays.
YouTube Upfront Spend (~$2.5B): Calculated based on the NFL Sunday Ticket annual rights fee ($2B) plus estimated music and live event licensing, excluding the variable Partner Program revenue share.
The combined Paramount-Warner library value would be historic. In 1948, when the Hollywood Studio System was at its Zenith, the Motion Picture Association of America or MPAA (formerly the MPPDA for Motion Picture Producers and Distributors of America, now simply the MPA) had eight studio members, five of whom also owned theater chains. The “Big Five” were Metro-Goldwyn-Mayer (MGM), Paramount Pictures, 20th Century-Fox, Warner Bros. and RKO Radio Pictures. The “Little Three” without theatrical vertical integration were Universal Pictures, Columbia Pictures and United Artists. With Warner Bros. having already absorbed the classic MGM and RKO libraries, merging with the Paramount library would put four of the original “Big Five” under the same flag.
“The AT&T Seven" refers to the specific cohort of board members who transitioned from the AT&T/WarnerMedia board to the WBD board following the 2022 merger. They include: Samuel A. Di Piazza, Jr., Board Chair, former CEO of PwC.; Debra L. Lee, former CEO of BET; Richard W. Fisher, former Dallas Fed President; Paula A. Price, former CFO of Macy’s; Geoffrey Y. Yang, Venture Capitalist; Fazal Merchant, former CFO of DreamWorks; Li Haslett Chen, tech entrepreneur.
Full disclosure, I spent two days on the set of Rush Hour 2 including one-on-one “trailer time” with Jackie Chan, Chris Tucker, Brett Ratner and other members of the production team — and I feel reasonably secure in guaranteeing that a fourth installment will have zero political impact — domestically or globally. If anything, it’s likely to soften relations between China and the U.S. in large part because Jackie has gone out of his way to say nice things about both Xi Jinping and Donald Trump. But he also said nice things about me — so there’s no accounting for taste.
Warner Bros. folded Fine Line Features in March of 2005.
Disney terminated its contract with Miramax chiefs Bob and Harvey Weinsten in September of 2005 before finally selling the unit in July of 2010.
Paramount Pictures terminated Paramount Classics in October of 2005.
Warner Bros. terminated both Warner Independent Pictures (WIP) and Picturehouse in November of 2008 (the latter was since resurrected by Bob and Jeanne Berney in 2013).
Warner Bros. terminated New Line Cinema in February of 2008.
First Look Studios folded in November of 2010.
Box Office Data
Domestic market share figures are derived from annual distributor-share tables published by Box Office Mojo and The Numbers for 2015–2025. Shares are aggregated by studio and averaged across the period. All figures represent U.S. and Canada theatrical box office only.
Studio Grouping Methodology
Studios are grouped into “index-controlled” and “non-index-controlled” categories based on ownership structure and shareholder concentration. 20th Century Fox is treated as independent through 2019 and consolidated into Disney thereafter.
Streaming Subscribers (Domestic Adjustment)
Streaming subscriber figures are based on company-reported global totals (Netflix, Disney, Comcast, Warner Bros. Discovery, Paramount) and adjusted to U.S./Canada estimates using industry-standard regional allocation ranges (typically 35–50% of global subscribers for North America). Hulu and Peacock are treated as primarily domestic services.
Linear / Cable Reach
Linear television reach is based on U.S. household estimates from Nielsen and S&P Global. Broadcast network owners (Disney/ABC, Comcast/NBC, Paramount/CBS) are assumed to reach the full U.S. TV universe (~120M households), while cable network reach reflects declining pay-TV penetration (~34%).
Amazon and Apple Streaming
Amazon Prime Video and Apple TV+ subscriber figures are based on industry analyst estimates, as neither company discloses full subscriber counts. North American estimates are derived from CIRP, Statista, and Reuters reporting.
Woke Hollywood will not have a future
Incredibly thoughtful piece. One thing I'm going to need to keep chewing on is around how it is "increasingly difficult to respond swiftly and creatively to market shifts as they occurincreasingly difficult to respond swiftly and creatively to market shifts as they occur."
This is definitely true, and you outline many reasons why. There is also another nearly paradoxical aspect that studios are not merely subjects responding to the market but also agents shaping it. Lots to keep thinking on. Again, phenomenal post.