The $80bn Debt Trap Facing Hollywood’s Mega Studio Deal

By the Editorial Team · Sunday, October 11, 2026

David Ellison finalized a $110 billion merger between Paramount and Warner Bros, forming Skydance, a media powerhouse with major franchises, streaming platforms, and news outlets under its umbrella. Despite its vast scale, the company faces financial strain due to an $80 billion debt burden—nearly three times the industry norm—raising concerns about its ability to manage obligations while meeting production and cost-cutting requirements.

David Ellison has completed a $110 billion merger between Paramount and Warner Bros, creating a media giant now known as Skydance. The transaction, one of the largest in entertainment history, combines two major Hollywood studios along with an extensive portfolio of intellectual property, including the Harry Potter franchise, Game of Thrones, and SpongeBob SquarePants, as well as prominent streaming platforms HBO Max and Paramount+, and news outlets CNN and CBS.

Despite the merger’s scale and Ellison’s emergence as a key player in the industry, the company faces significant financial challenges. The acquisition was largely financed through debt, leaving Skydance with a net debt burden estimated at about $80 billion—roughly seven times its profits—according to industry analysts. This leverage ratio is nearly three times higher than the typical 2.5 times seen in the sector, raising concerns about the company’s ability to service its obligations. Paramount alone raised $52 billion of debt in the week leading up to the deal’s closure, marking the largest leveraged buyout on record.

The timing of the deal coincided with a broader bond market sell-off and rising borrowing costs, intensifying the financial pressures. Additional constraints come from legal requirements obligating Skydance to release at least 30 films annually in US theaters and to increase US production spending by $1.5 billion over the next five years. These commitments could further strain the company’s cash flow amid the need for cost reductions.

Skydance’s leadership acknowledges the debt challenge but underscores the company’s potential. Co-chief executive Ynon Kreiz, former head of toy manufacturer Mattel, emphasized that content spending should be viewed as an investment likely to drive growth. According to company executives, Skydance generates annual revenues near $70 billion and aims to reduce its leverage ratio to below three times profit by 2029. Cost-cutting measures are expected to save around $6 billion, with analysts pointing to office property expenses and operational efficiencies—particularly affecting the 4,000 Warner Bros employees in the UK—as key targets.

Paramount+ has seen growth in the UK, now available in approximately four million homes, positioning it as the fourth-largest streaming service behind Netflix, Amazon Prime, and Disney+. HBO Max, which launched in the UK in March, has yet to appear in official metrics but plans to boost its subscriber base around the release of a new Harry Potter series set for Christmas Day.

The deal has attracted significant equity backing from the Ellison family, led by billionaire Larry Ellison, and sovereign wealth funds from Saudi Arabia, Qatar, and Abu Dhabi, which collectively contributed $24 billion. Former UK Prime Minister Tony Blair has been appointed as an adviser to Skydance’s board, potentially representing the interests of these Gulf investors.

While the merged company benefits from a vast library of content and global scale, its future will depend heavily on managing the substantial debt load and executing strategic cost reductions. The Ellison family and their partners face mounting pressure to demonstrate that the financing structure and operational plans can sustain this landmark merger.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.