According to persons familiar with the situation, Warner Bros. Discovery Inc. discussed a prospective merger with Paramount Global, possibly combining two of the world's largest media businesses. The conversations are preliminary and may not result in an agreement, according to one of the persons who asked not to be identified because the discussions are so early. 

As per Axios, David Zaslav, CEO of Warner Bros. Discovery Inc., met with Bob Bakish, CEO of Paramount Global, on Tuesday in New York to discuss a prospective transaction. He has also spoken with Shari Redstone, whose family company holds a controlling position in Paramount, which owns CBS and other media companies. A merger of the firms would bring together well-known Hollywood holdings such as the Paramount and Warner Bros. film and television studios, as well as several pay-TV and broadcast channels such as HBO and CBS. 

A merger of the two huge media giants would almost certainly be scrutinized closely by federal regulators, who have contested multiple mergers during the Biden administration. According to Axios, executives at Warner Bros. believe such a merger is possible because their firm does not possess a broadcast network like Paramount's CBS. Both firms have struggled as customers abandon cable TV in favor of a new generation of streaming options. Streaming businesses are costly to operate and have not compensated for declining profitability at traditional networks. Programming costs, particularly for sports, have been rising.

According to people familiar with Paramount's thinking, the board has become more receptive to strategic alternatives such as forming an association with another media behemoth or selling to a private equity bidder or technology firm. Non-core assets, such as real estate and the Simon & Schuster booking publishing firm, have been sold by Paramount. According to Bloomberg News, the business is once again in talks regarding selling the Black Entertainment Television network, this time with a management-led consortium.

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The Redstone family holds a majority of the voting stock of Paramount through National Amusements, a family-holding business. Shari Redstone has also spoken with film producer David Ellison and RedBird Capital Partners about selling her family's share in Paramount. Warner Bros.' Zaslav has demonstrated a strong appetite for acquisitions, integrating his Discovery cable networks with Scripps channels and later acquiring Warner Media from AT&T Inc. in a $43 billion merger.

The latter agreement featured tax breaks that prevented Warner Bros. from making additional purchases until April 2024, two years after the AT&T deal was completed. In extended trade, Paramount shares were down more than 1%. Warner Bros. was down over 1.5%.