How big is Paramount’s debt problem?
Analysis
Paramount’s merger with Warner Bros Discovery (WBD) would create a combined entity with net debt of $79bn, the company’s leadership told investors this week.
Such debt appears extraordinarily high for a media business awash in declining assets, but is it manageable?
In a slide deck shared with investors, Paramount’s leadership indicated its net leverage at the close of the deal — calculated by dividing net debt by the sum of the most recent four quarters of adjusted Ebitda (its measure of profit) — is 6.5x.
In the deck, Paramount said it expects to realise $6bn in “run-rate synergies” — essentially equivalent to cost savings — within three years. It is currently forecasting its “post-synergies” net leverage to be 4.3x, with the aim of reducing it further to 3.0x within three years of closing the deal.
Media analyst Alex DeGroote has previously told The Media Leader that net leverage above 3x is generally considered too high for a media company, let alone one whose newly acquired assets saw a decline in profitability last year. (In Q4 2025, Warner Bros Discovery reported a 19% decline in adjusted Ebitda, the conglomerate’s measure of profit. For the full year, WBD’s profit fell 3% to $8.7bn.)
Such a high level of debt presents business risks. Chiefly, if profit wanes or interest rates increase, making the debt harder to pay off, Paramount could get squeezed, leaving less cash on the table available to finance new projects or content production.
Indeed, Brian Wieser, founder of Madison and Wall and a media industry analyst, told The Media Leader that Paramount’s intended debt management is “sustainable to the extent that interest rates don’t spike too much and the business doesn’t decline by much.”
Wieser believes the current level of debt is “manageable assuming the top line holds up”, which would likely require a return to profitability for Warner Bros Discovery’s flagging assets. Those include linear TV assets that have long weighed on the growth of still less-lucrative streaming assets.
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Kate Scott-Dawkins, global head of business intelligence at WPP Media, told The Media Leader that Paramount’s goal of reaching investment-grade metrics within three years is “ambitious” and that investors are likely to demand the realisation of cost savings rather than merely their stated potential.
Credit ratings companies Fitch and S&P Global Ratings have both issued downgrades to Paramount’s debt following the closure of its deal to acquire Paramount. Fitch further placed the company on negative watch pending details of the transaction. Reasons cited for the downgrade included “competitive pressures across the media sector” and “continued [free cash flow] headwinds from significant transformation costs”.
Expect severe content cutting
In many ways, Paramount’s acquisition of Warner Bros. Discovery offers something of a redux of the business tumult caused by WarnerMedia’s 2022 merger with Discovery, albeit on an even larger scale. That merger resulted in $53bn of debt, and in its first post-merger financial report in the summer of 2022, WBD registered a net leverage of 5.0x.
The company subsequently underwent several painful years of cost-cutting measures, including thousands of layoffs, the cancellation of several finished films to collect tax write-offs, and multiple price hikes for its streaming service HBO Max.
Ultimately, CEO David Zaslav and CFO Gunnar Wiedenfels succeeded in reducing the company’s net leverage to 3.3x ahead of Paramount’s proposed acquisition. WBD had previously stated its goal was to further reduce net leverage to between 2.5x and 3.0x.
Paramount’s proposed acquisition is widely expected to be greenlit by a friendly Trump administration. Federal Communications Chair (FCC) Brendan Carr told CNBC this week that he expects the deal to be approved “quickly”.
As Scott-Dawkins described, the “most obvious” lever for eventual debt reduction is content spend. She noted that on a combined pro forma basis, Paramount and WBD spent roughly $28bn in 2025, more than any other media entity (excluding amortised costs), including Comcast ($25bn), YouTube ($24bn), Amazon ($22bn), Disney ($20bn) and Netflix ($16bn). That is according to WPP Media’s own estimates, where public company disclosures were not available.
“Rationalising that spend across HBO Max and Paramount+ is one of the clearest near-term paths to improving cash flow, even if cuts risk reducing the entity’s share of content spending in a fiercely competitive streaming environment,” Scott-Dawkins explained.
She added: “One must keep in mind that some of Paramount Skydance-Warner Bros Discovery’s competitors have revenue models including cloud services with very different margin profiles than traditional media,” referring to companies such as Amazon or Apple. “These are companies that can afford to treat content as a strategic loss leader. PSKY-WBD cannot.”
Importantly, the merged Paramount and WBD entity would have a large live sports portfolio in the US market, including deals with the NFL, MLB, NHL, UFC, and the Men’s NCAA basketball tournament. Until last year, Warner Bros Discovery’s TNT Sports also prominently carried NBA coverage before losing the rights to Amazon Prime Video.
With the NFL the core remaining revenue driver, and with its own rights expected to be renegotiated “at a significant premium” upon their expiry in 2030, Scott-Dawkins warned the new Paramount could struggle to win another highly-important bidding war if it is strapped servicing its debt, further reducing the company’s most valuable linear assets.
This is on top of flagging viewership at other tentpole properties. Under CEO David Ellison, a known ally of US President Donald Trump, ratings at CBS News have waned following the acquisition of The Free Press and subsequent appointment of Bari Weiss as its editor-in-chief. The outlet has been criticised for shifting away from news coverage in favour of biased political commentary, as well as for abruptly cancelling its late-night talk show, The Late Show with Stephen Colbert, and spiking an interview with a Democratic politician on that show in response to threats from the FCC.
CNN employees have reportedly raised concerns that similar changes to its editorial standards are likely under the Ellisons’ ownership.
Will the Sky be blue?
Paramount’s leadership has said it intends to merge its own streaming service, Paramount+, with HBO Max, itself a combination of content from HBO and Discovery+.
Despite this, according to a report from Variety, the launch of HBO Max is still going ahead in the UK and Ireland. The service is slated to launch on 26 March, with subscription prices ranging from £4.99/month to £14.99/month.
The service’s ad tier will be available to Sky subscribers at no additional cost upon launch, and Sky will also offer a bundle that includes the service, along with Netflix and Disney+.
The Media Leader understands that such plans are still also expected to go ahead. However, a spokesperson for Sky declined to speculate on whether Paramount’s ownership of Warner Bros Discovery would change any of its long-term plans, particularly if HBO Max is ultimately subsumed into Paramount+.
Both Paramount and WBD have held long-standing partnerships with Sky. Paramount+ is currently accessible to Sky Cinema subscribers at no additional cost.
But the issue highlights what Scott-Dawkins sees as the biggest risk to Paramount’s position in the evolving media landscape: “it remains a content producer and a tile on someone else’s device.”
She explained: “It must compete not just for viewers, but for distribution, discovery and platform real estate against companies that own the hardware, the operating system and the algorithm.”
The path forward, Scott-Dawkins suggested, requires not just debt reduction, “but a strategic rethinking of what kind of company it wants to be” in a media landscape increasingly dominated by “media companies [that] may not primarily think of themselves as media companies at all.”
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