Skydance’s $80 Billion Debt Bomb: How Will Warner Bros. and Paramount’s New Owner Make It Work?

On a frigid but bright December morning, David Ellison, his top legal chief Makan Delrahim and coterie of executives took over a subterranean space in the New York City office of investment bank UBS.

Just a few dozen feet away, on the other side of the corporate lunch buffet of roast chicken and farro salad, UBS was hosting its Global Media and Communications Conference. Among the speakers on the agenda: Netflix co-CEOs Ted Sarandos and Greg Peters, fresh off their deal to buy the Warner Bros. Studio and HBO Max streaming business.

Ellison was not on the line up, but he nonetheless took advantage of the location, quietly ushering investors, portfolio managers and analysts into the corner that Paramount secured, where they made their pitch clear: Netflix should not be the home for Warners. We should be.

Ellison, one attendee of those meetings told The Hollywood Reporter at the time, was a “man on a mission.”

Nearly a year later, Ellison’s mission is complete.

In the span of less than a year and a half, he closed deals to secure two of Hollywood’s storied film studios, Paramount and Warner Bros., and brought together two of the industry’s more formidable streaming services in Paramount+ and HBO Max.

Ellison, and his consolidated Hollywood giant Skydance, is now an entertainment juggernaut that rivals only Netflix and Disney for scale. Now comes the hard part.

The deal is done. The WBD shareholders (and David Zaslav) have been paid, and two companies have become one. What now?

The combined company now has the scale of the Netflixes and Disneys of the world, but it also has a debt load big enough ($80 billion!) that there is little room for error, and that debt will need to be serviced sooner rather than later.

Services will merge, studios will merge, org structures will be set, the future of CBS News and CNN will be determined, and sports rights will be unified. Streaming prices will likely keep rising (maybe HBO becomes an add-on to Paramount+?), and, yes, more movies will be made, both existing projects like the Days of Thunder sequel and the Game of Thrones film, and new ideas yet to be born.

Thousands of layoffs are expected as the companies consolidate, and Ellison and his team are set to lay out the go-forward strategy, with streaming and theatrical films top of mind.

That may be why Ellison persuaded Ynon Kreiz, the CEO of Mattel, to depart the toy giant for a job as co-CEO.

When Kreiz, a media veteran (he previously led Maker Studios and Endemol), joined Mattel as its CEO in early 2018, he promised a “transformation” of the company. Just a few months later, he launched an expansive overhaul, slashing 22 percent of its workforce and restructuring it for a tech-forward future.

At Paramount, insiders expect him to operate with similar speed, with Ellison and his investors targeting $6 billion in synergies. Kreiz will be the one to lead that effort.

“We will embrace the opportunities AI provides to expand what our creatives can imagine and to make our businesses even more productive,” Kreiz and Ellison wrote in a companywide email to staff titled “Day 1,” outlining priorities. “The opportunities ahead are enormous, and we intend to seize them. But one principle will never change: technology must serve the art – never the other way around.”

Gerry Cardinale, the founder of RedBird Capital and Ellison’s operating partner in the deal, told a conference last week that the “notion that $6 billion of cost-related synergies means you’re firing all these people is just completely antiquated.”

Cardinale insists that much of the cost savings can come from things like combining tech stacks, more efficient marketing spend, and simplifying the vendors it works with.And in their joint letter, Ellison and Kreiz wrote about going “further than traditional synergies. By embracing the most advanced technologies available and embedding them into how we operate, we will work smarter, move faster and unlock efficiencies the merger alone could not deliver.”

But everyone knows that significant layoffs are coming as the two companies combine. Paramount, after all, cut about 10 percent of its workforce in 2025 in conjunction with the Skydance deal.

“Wake up Hollywood, you’re going to need to rationalize costs,” one industry veteran familiar with leadership’s thinking said. “That’s not a bad thing. That’s called Darwinian evolution.”

The real estate footprint of the company will shrink (though the two L.A. studio lots are safe), particularly in New York, where it will have Paramount’s Times Square HQ, the CBS Broadcast Center and Ed Sullivan Theater as well as WBD’s Union Square HQ (home of the Food Network Test Kitchen) as well as CNN’s newsroom and studios in Hudson Yards.

According to Bank of America analyst Jessica Reif Ehrlich, the promised savings would “provide a meaningful tailwind to profitability, free cash flow generation and deleveraging over time.

“However, history suggests realizing synergies of this magnitude in media is rarely linear, and we anticipate the benefits to be offset by integration costs, execution risk and elevated leverage in the near term,” she continued in a Sep. 24 note.

Still, it is likely the only path forward for Skydance.

“There’s a virtue to consolidation here, because that is the only way you’re going to level the playing field, and it’s the only way Hollywood is going to put themselves in a position where it balances out the balance of power,” the industry veteran adds, noting the technological disintermediation that threatens Hollywood. “Don’t forget, AI is only valuable with the data that feeds it.”

It is also why one of Ellison’s first orders of business was securing the talent of Casey Bloys, the HBO Max chief who will run streaming for the combined company.

Going forward, streaming will be the economic engine of the company, and Bloys, who not only shepherded HBO but managed to expand the brand in populist directions via shows like The Pitt and The Penguin, is being given wide leeway to bring that ethos to the combined service. It is an approach that will only become more important once Taylor Sheridan decamps for NBCUniversal in a couple years.

An executive at a competing media company said that, among all the executives at Warners, Bloys was the one that they “had to keep.”

“If he left, I’m not sure they could have kept HBO intact,” they added. The brand would have existed, of course, but the connective tissue would have been broken.

With Pamela Abdy and Mike De Luca on the way out (but James Gunn and Peter Safran still in), the studios will need to stabilize under their new Paramount leadership of Josh Greenstein and Dana Goldberg. After all, Ellison has promised to release at least 32 movies per year beginning in 2029, and to produce some 170 TV shows.

DC, meanwhile, appears to be elevated in the new world order, no longer having to be subservient to the larger WB brand.

And CBS News and CNN remain a particularly hot-button topic, given the chaos that has enveloped CBS since Ellison appointed Bari Weiss as editor-in-chief.

Ellison is said to genuinely admire Weiss and her vision, which is premised on appealing to a silent majority of Americans who are not far left or far right, and being somewhat contrarian or against the grain.

“She operates with the idea that if every other place is taking one approach or angle to a story, there might be room to do something different, even if the underlying facts are the facts,” one TV news veteran said.

But it is far from obvious that she will get any oversight over CNN, in fact one executive at a competing news operation said that it would be “crazy” to do so. That is why the official news that Thompson had inked a deal to remain chairman and editor-in-chief of CNN such a relief to veterans of the news brand.

The issue is that, while CBS News is seen as a breakeven or barely profitable endeavor, one primarily about brand-building, CNN is an actual profit center.

CNN is projected to have $1.8 billion in revenue in 2026, according to disclosures from Warner Bros. Discovery, rising to $1.9 billion in 2027, $2 billion in 2028 and $2.2 billion by 2030. CNN’s adjusted EBITDA in 2026 is estimated to be about $600 million, before falling to $500 million in 2027 and remaining flat at $600 million through 2030.

While CNN’s revenue is relatively modest compared to the rest of the WBD cable portfolio ($9.9 billion in 2026) its EBITDA is strong, with every other channel in its portfolio combining for $3.8 billion and expected to fall to $1.9 billion through 2030. CNN, by contrast, is expected to be flat in EBITDA in that same period.

But there will be challenges.

Given the debt load, the combined company will need to keep those profits flowing, and combining CBS News and CNN is seen as an obvious source of cost savings, but it is not clear how that can happen with both Weiss and Thompson in the building.

And all eyes will be on CNN’s editorial independence board: Who will be on it, what power they will have, and if it salves concerns from viewers and politicos.

George Cheeks will become, for all intents and purposes, the most powerful executive in linear TV. His purview will include CBS, and more cable channels than any other company by far, spanning sports, entertainment, news and more.

But most observers recognize that those channels will be milked for cash, with wide cuts expected as the company seeks to harvest the revenue from carriage fees and redistribute to other priorities, like streaming, and paying down that pesky debt.

CBS Sports will become a juggernaut, with the NFL, all of March Madness, college football, MLB, NHL, UFC, The Masters, international soccer rights and much more.

JB Perrette, a WBD holdover, will be responsible for the business of TV and streaming, letting Bloys and Cheeks cook on content, balancing declining linear TV and growing streaming.

And the company will also have what an executive at a competitor called a “secret weapon”: Warner Bros. Games.

The game studio is the home of Mortal Kombat, and has produced hit games based on IP like Batman, Harry Potter and Game of Thrones. Earlier this year Ellison launched a new gaming studio within Paramount, and the combined game studio will be formidable, with a vast library of IP to mine (including from outside partners like Disney, which has worked with both studios).

While all eyes will be on the film and TV output, the competing executive speculated that the game studio could become a bigger part of the business than Hollywood expects.

Still, as Morgan Stanley’s Sean Diffley noted Sep. 22, this is ultimately about creating an intellectual property behemoth that only has one true rival in Disney (Netflix and YouTube are streaming giants, but not IP giants). “While in many ways the hard part begins now (and we are fully sympathetic to the complexity of integrating large media assets), the risk of not getting the asset was significantly greater and we believe scale and IP are important in an ever increasingly fragmented media ecosystem,” Diffley wrote.

But first, they have that $80 billion in debt to reduce.