Paramount, Comcast, Netflix submit bids for Warner Bros. Discovery

Why it matters: In a hyper-competitive streaming environment, scale matters. And assets like WBD, which includes the nation's top-performing movie studio so far this year (Warner Bros. Pictures) and a prestige streamer (HBO Max), don't come up for grabs often.

Driving the news: WBD's board set a Thursday deadline for takeover bids and received three propositions, sources confirmed to Axios.

• Paramount, which already owns a top movie studio (Paramount Pictures), a major streamer (Paramount+), a broadcaster (CBS) and a slew of cable networks, has submitted a bid for all of WBD, including its cable channels like CNN and TBS.
• Netflix — which doesn't own a movie studio or TV networks but has one of the largest subscription streaming bases in the world — submitted a bid solely for WBD's streaming and studio businesses.
• Comcast, which owns a top movie studio in Universal, similarly is vying solely for WBD's streaming and studio businesses.
• Comcast currently owns a host of cable networks, including MS NOW and CNBC, but plans to spin them out into a separate publicly traded company early next year.

Catch up quick: Before the deal talks, WBD's stock had languished amid a challenging environment for traditional media companies.

• Last month, the company said it would consider a sale while continuing to pursue a possible split that would separate its streaming and studio assets from its cable division.
• A split, the firm has argued, would create more shareholder value than keeping its assets together.
• It's now up to WBD's board to decide whether a takeover bid could drive even more shareholder value than a split.

Follow the money: Paramount, which is currently valued at less than a third of WBD on the public markets, would need to raise money to support its bid.

• The company, as Axios has reported, submitted a cash and stock bid of $23.50 per share in October, offering a massive premium to WBD's pre-deal talk stock price. But WBD's board was looking for a price tag closer to $30 per share.
• Comcast would also need to raise debt to support its bid, but analysts feel confident it could raise cash, given its credit rating.
• Netflix, which is currently valued at $449 billion on the public market, likely wouldn't face financial challenges.
• WBD, Paramount, Netflix and Comcast did not comment.

Reality check: While each bid presents its own unique regulatory challenges, WBD lawyers don't think any hurdles would be impossible to conquer in court should the Justice Department sue to block a deal.

• What's more likely is that WBD's board will have to weigh any time wasted on the possible regulatory setbacks of a particular bid against its business value.

Zoom in: President Trump is widely seen as favoring a Paramount bid over one by Comcast given his alliance with Larry Ellison, father of Paramount CEO and chair David Ellison, and his public disdain for Comcast boss Brian Roberts.

• The president could pressure the DOJ to sue to block a Comcast bid, but that doesn't mean the DOJ would win that fight in court.
• The DOJ famously lost its bid to block AT&T's acquisition of Time Warner in 2018, despite reported Trump pressure to block the deal.
• Paramount and Comcast both own major movie studios, and regulators could argue that the combination of Paramount Pictures or Universal with Warner Bros. Pictures would reduce competition.
• But that's a tough argument to make considering regulators approved a merger between Disney and Fox in 2019 that brought together two major studios.
• If regulators were to argue that the media market should be sized based on streaming subscriptions, Netflix — the largest subscription streamer globally — would be more vulnerable, but the DOJ would need to convince a judge that's the right way to evaluate a media market.
• The DOJ is unlikely to hang its case to block Paramount's deal based on the combination of its cable assets with WBD's, given cable is in terminal decline.

The intrigue: Recent reports suggest Paramount has been in touch with Middle Eastern sovereign wealth funds to possibly raise money later to support its bid.

• Any foreign money used to support a bid could face scrutiny, but it's likely that Paramount — or any bidder taking on foreign cash — would structure its bid to avoid crossing any foreign ownership threshold concerns.

What's next: Sources told Axios that WBD's board is looking to decide about whether to accept a bid or continue its path to split by year's end, which would punt any regulatory approval processes to next year.