The Warner Bros. Curse: Wall Street’s $300 Billion Amnesia
Are Netflix, Paramount, and Comcast ready to feast on the carcass of Warner Bros. Discovery? History is not on their side...
As Netflix, Paramount, and Comcast circle Warner Bros. Discovery like vultures over a carcass that’s been picked clean at least three times before, the financial press is breathlessly debating the really important questions: Does Trump prefer the Ellison bid? Will antitrust regulators blink? Can David Zaslav finally escape the mess he helped create?
Here’s a question nobody seems to be asking: Why would anyone want to buy this company?
Warner Bros. has been the site of approximately $300 billion in shareholder value destruction over three consecutive mega-mergers. The corpses of AOL, AT&T’s media ambitions, and Discovery’s “transformation” strategy litter the landscape like a corporate Somme. And Wall Street’s solution is - wait for it - another merger.
You have to admire the optimism. Or the amnesia. Probably both.
The Graveyard Shift
Let’s take a stroll through the cemetery.
Act I: AOL (2000-2009). On January 10, 2000, AOL announced it was acquiring Time Warner for $182 billion - the largest merger in American history. The combined company would be worth $350 billion and dominate the “converged” future of media and technology. Two years later, it reported a $99 billion loss—still the worst annual loss in corporate history. Ted Turner lost 80% of his wealth. Employees watched their retirement accounts vaporize. Over $200 billion in shareholder value disappeared, which in today’s dollars is roughly $350 billion.
Act II: AT&T (2018-2022). Surely lessons were learned? Of course not. AT&T paid $85.4 billion for Time Warner, promising “transformation” through the marriage of content and distribution. Four years later, it spun off WarnerMedia to Discovery for $43 billion - a $40 billion loss that Variety called “one of the most disastrous mergers in media history, perhaps second only to the AOL/Time Warner union.” One insider described the whole episode as “a nesting doll of ridiculousness.” Ouch!
Act III: Discovery (2022-2025). David Zaslav promised a “scaled-up powerhouse.” Instead, he delivered a $10 billion write-down, the shelving of a $90 million Batgirl movie for tax purposes, and a stock that cratered from $77.27 to $7.52. Now the company is being auctioned off again, because apparently the fourth time’s the charm.
NPR’s Planet Money called it “The Warner Bros. Curse” just yesterday. But “curse” implies supernatural forces. What we’re witnessing is more banal: the entirely predictable outcome of ignoring decades of research showing that mergers almost always fail.
The 70% Solution (To Nothing)
Here’s what the business press won’t tell you while it’s busy covering which billionaire has Trump’s ear: 70-90% of mergers fail. This isn’t speculation. It’s the conclusion of virtually every serious study on the subject.
NYU’s Baruch Lev and the University at Buffalo’s Feng Gu recently published The M&A Failure Trap , analyzing 40,000 acquisitions over 40 years. Their finding? 70-75% fail to achieve their stated objectives. Worse, the failure rate is increasing , and acquisition premiums are rising even as outcomes deteriorate.
Why does this keep happening? In 1986, economist Richard Roll proposed what he called the “Hubris Hypothesis”: CEOs believe their own valuation is superior to the market’s. They think they’re smarter than everyone else. They are, statistically speaking, wrong.
Subsequent research has confirmed that overconfident CEOs pay higher premiums, destroy more value, and are “more likely to undertake value-destroying projects that rational managers would forgo.” One study found that each unit increase in CEO overconfidence translates to 8% higher acquisition premiums and $294 million in value destruction for the average deal.
But sure, this time will be different...
The Synergy Fairy
The word “synergy” has tripled in frequency in merger announcements over the past two decades. It’s become a magic incantation, a get-out-of-due-diligence-free card. Combine two struggling companies, sprinkle some synergy dust, and watch the profits materialise.
One columnist put it best this week: “I can tell a story where the promised synergies finally materialise. But then, I can tell a story where aliens invade earth, and mankind repels the attack by pelting them with marshmallows. Saying the words doesn’t make my story true, or even plausible.”
Media analyst Marion Ranchet has observed that over the last decade of media consolidation, “one pattern repeats: the CFO always wins. The result? An industry run by people whose job is to cut, not to build.” Disney-Fox, Paramount-Skydance, Viacom-CBS, AT&T-Warner - each promised synergies, each ended with layoffs and creative paralysis.
And yet here we are again, with Netflix offering $82.7 billion and Paramount launching a $108 billion hostile takeover bid that has just been rebuffed, presumably because the historical record is just a series of anomalies that don’t apply to them .
What You Lose
Here’s what the media M&A cheerleaders never mention: when studios merge, content decreases . CNBC analyst Michael Creutz put it bluntly: “If Warner merges with any of these other companies, you are going to see... a similar dynamic on the film side, you’re going to see a similar dynamic on the TV production side... probably going to result in less content for consumers.” Like we’re not starved of good content as it is.
This isn’t speculation. It’s the pattern. The Discovery merger gave us a company that shelved the nearly-complete Batgirl for a tax write-off, erased decades of content from streaming platforms, and botched the Mad Men remaster so badly that viewers could see crew members holding “vomit hoses” in the frame. The Paramount-Skydance merger has already announced 2,000-3,000 layoffs. These aren’t efficiencies; they’re amputations.
The Electronic Frontier Foundation recently noted the obvious: “The fewer studios that exist, the fewer chances good art gets to escape Hollywood and make it to our eyes and ears.” Every merger means fewer buyers for scripts, fewer greenlit projects, fewer creative risks. The “synergies” that excite Wall Street translate directly into the sameness that bores audiences.
So while analysts debate enterprise valuations, remember what’s actually at stake: the next decade of DC films, HBO dramas, and Warner’s century-old library - all in the hands of whoever promises the most “cost savings.” If history is any guide, that means fewer shows, safer bets, and more franchises squeezed until they’re dust.
The Current Circus
Netflix wants Warner’s studios and HBO Max to “strengthen its content offering.” Yes, Netflix, the same company whose co-CEO has called movie theatres “outdated”, promises to nurture a studio that’s been making theatrical films for 102 years. Cinema United called it an “unprecedented threat” to exhibition. But I’m sure those synergies will work out.
Paramount Skydance , backed by Larry Ellison’s fortune and blessed by Trump’s favour, wants to create a “scaled-up media and entertainment powerhouse.” Reader, I have heard this exact phrase before. It did not end well. It looks like it may just be their lucky day - as their hostile takeover was just rejected because Trump’s son-in-law backed out. Maybe Ellison doesn’t have the Trump mandate to heaven after all.
Comcast wisely dropped out, explaining they didn’t want to “stress the balance sheet.” Translation: someone in that building read a history book.
The Prediction
Strategy consultant Roger L. Martin predicted the AT&T disaster in 2019: “The Time Warner acquisition will be a disaster. The CEO will lose his job. AT&T will get back half what it paid.” All three came true.
So here’s mine: whoever wins the Warner Bros. bidding war will lose. Not because of Trump, not because of regulators, but because the research is unambiguous and the track record is catastrophic.
The curse isn’t supernatural. It’s structural. Large media mergers generally fail because “synergies” are fantasies, cultural integration is impossible, and CEO hubris is immune to evidence. Warner Bros. isn’t uniquely cursed; it’s just the most expensive laboratory for proving what economists have known for decades.
Wall Street keeps writing checks, investment bankers keep collecting fees, and financial journalists keep covering the horse race instead of asking why everyone’s betting on a horse that’s died three times.
Maybe the real curse is believing we’ll ever learn. Or that Netflix will give us streaming movies worth watching again. Isn’t this why we signed up in the first place?
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