AI Expected to Drive Cost Savings in Proposed Paramount-Warner Bros. Merger

Artificial intelligence is expected to play a major role in improving efficiency if Paramount completes its proposed acquisition of Warner Bros. Discovery, according to Morgan Stanley analyst Sean Diffley, Brian Sozzi reported for Yahoo Finance.

The proposed acquisition by David Ellison-led Paramount Skydance would combine CBS, MTV, and Paramount Pictures with HBO, CNN, and Warner Bros. film and television studios. (Photo: Skydance)

"We've estimated anywhere between 20 percent and 40 percent of costs could be saved through AI," Diffley said.

He added that Paramount is among the media companies best positioned to use artificial intelligence to improve operational efficiency, particularly in pre-production and post-production work.

"Instead of having to ship an entire cast and crew to a location, they could do a lot of touch-ups with AI and really expand creativity," Diffley said.

The proposed acquisition by David Ellison-led Paramount Skydance would combine CBS, MTV, and Paramount Pictures with HBO, CNN, and Warner Bros. film and television studios, creating one of the world's largest media companies.

The deal, reportedly valued at approximately $111 billion, follows a lengthy bidding process that included Netflix.

Despite the strategic opportunities, Diffley noted that the combined company would begin with a substantial debt burden.

"They're going to be 6.5 times leveraged at deal close. They've got to get it to under three times leverage within three years," he said.

According to Diffley, management expects to generate approximately $6 billion in synergies, with less than half coming from workforce reductions. The remainder is expected to come from technology integration, cloud infrastructure consolidation, and other operational efficiencies.