Sell to David Ellison or Split: David Zaslav Weighs the Options for Warner Bros. Discovery

Ever since the media mogul John Malone helped persuade David Zaslav to leave NBC and become the CEO of Discovery Communications, the executive has defined his leadership by dealmaking. He acquired Scripps Networks to try and build a reality-driven entertainment giant, and forged the deal for WarnerMedia over golf emojis with AT&T CEO John Stankey.

But the next few months will be a critical time, as Zaslav grapples with what will be his most consequential deal yet: Does he sell? Or does he split?

Paramount CEO David Ellison has made no secret about his desire for Warner Bros. Discovery in private conversations with Hollywood power players, but his initial approach of $20 per share was dismissed by WBD, Bloomberg reported over the weekend.

Of course Ellison, perhaps armed with a higher offer (possibly one backed by his father Larry Ellison or a third party like Apollo), will likely return, and per The Wall Street Journal he may attempt to go directly to WBD shareholders if the company doesn’t engage. That said, the argument they are making about regulatory concerns (namely that Paramount is in better shape to evade tough scrutiny from the Trump administration) can only carry so much weight relative to the dollar signs.

Still, Ellison has openly spoken about making big deals.

“I think, ironically, it was [WBD CEO] David Zaslav who said last year that consolidation in the media business is important. The way we approach everything is, first and foremost, what’s good for the talent community, what’s good for our shareholders and value creation, and what’s good for, basically, storytelling at large,” Ellison said at the Bloomberg Screentime conference last week. “From our standpoint, whether we approach any acquisition — and I actually do think there are a lot of options out there in terms of what might be actionable in the near future —we would approach it through the lens of wanting to make more, not less. … You need more content to yield more engagement.”

Ellison wants to scoop up Warner Bros. Discovery before Zaslav can execute his other big gambit: a split of the company in two, with HBO and the Warner Bros. studios in one business that he will lead, and Gunnar Weidenfels leading the former Discovery and Warner networks in another (along with added debt and a stake in the studios business).

The split, currently expected by April, is meant to unlock value, Zaslav and other WBD execs have argued, noting that a studios and HBO business unburdened by debt or linear TV channels would be much more appealing to potential acquirers, while the Discovery business (including CNN) would have multiple strategic options it could pursue.

Discovery could be run for cash, serve as a rollup vehicle, sell off assets piecemeal, reinvest in its brands or sell the whole thing off to private equity, notes Bank of America analyst Jessica Reif-Ehrlich, who was among the Wall Street insiders calling for such a strategic move last year. It’s a veritable Cheesecake Factory menu of options.

The influential Wall Street analyst, meanwhile, also frames the post-split Warner Bros. business as a “crown jewel” asset, one that would shake buyers off the sidelines.

“It is our view that as a standalone entity WBD’s streaming and studio assets would generate a bidding war amongst potential buyers, and therefore, we believe a split of the company can garner the greatest potential value,” Reif-Ehrlich wrote in a Sept. 30 note, after Ellison’s interest had been reported.

It’s a point of view that seems to be shared by WBD executives, perhaps confident that post-split Ellison and Paramount would still covet Warners, but so would Apple, Netflix, Comcast, Sony or other bidders.

But is the interest real? Or is it a mirage — as Ellison and his team are sure to argue. Greg Peters, the co-CEO of Netflix, when asked about a potential deal for Warner Bros., mostly dismissed the idea.

“We come from a deep heritage of being builders rather than buyers. I also think that one should have a reasonable amount of skepticism around big media mergers, they don’t have an amazing track record over the history of time,” Peters said, before leaving a door open, noting that “I would say it’s our responsibility to evaluate all our options.”

Another notable Wall Street analyst, LightShed’s Rich Greenfield, is similarly skeptical of a Netflix deal for WB.

“While we are sure there’s IP inside Warner Bros. that Netflix would love to remake or exploit, and while Hollywood catalog IP performs well on Netflix (Despicable Me 3 and The Mask are both in Netflix’s Top 10 movies today in the US), the content driving Netflix’s subscriber growth has been original IP,” Greenfield wrote Oct. 6. “Not to mention, Netflix is having no trouble licensing catalog content from Hollywood studios who are increasingly desperate to license to Netflix.”

Whatever happens in the near term, it’s clear that Warner Bros. is at a pivot point: Maybe Ellison circles back and delivers a deal that can bring the storied studio under Skydance control, or maybe Zaslav goes through with his split and sees what the market will bear.

One of the most storied studios in Hollywood could be acquired by another, by a tech giant, or left to fend for itself. Ellison is waiting in the wings. Is anyone else?