Barbie and Tom Cruise’s Top Gun are planning on getting hitched. Warner Bros Discovery, the Hollywood studio that brought us the Batman, Harry Potter and Barbie films, and Paramount Global, the media company behind Top Gun, Titanic and Mission: Impossible, are in merger talks that could create a $38bn (£30bn) colossus. David Zaslav, the chief executive of Warner, and Bob Bakish, his Paramount counterpart, discussed the potential deal over hours-long lunch at the latter’s Times Square office in New York this week. The companies declined to comment, but people close to them cautioned that the talks were at an early stage and a tie-up might not happen. Zaslav has also held talks with Shari Redstone, the billionaire chair of Paramount whose family owns 77% of the company’s voting shares, according to the US news website Axios, which first reported the merger talks. If the merger did go ahead, it would create one of the world’s biggest media companies. Warner owns HBO and CNN as well as the Warner Bros film studios. Paramount owns CBS, MTV, Paramount Pictures and string of TV stations around the world, including Channel 5 in the UK. Media companies are struggling to make large profits after spending billions attempting to compete against Netflix in the so-called “streaming war”. Warner and Paramount have a stock market capitalisations of $28bn and $10bn respective, so combined they could be worth $38bn. This would still be a fraction of Netfix’s $215bn valuation. Warner owns the Max streaming service that has nearly 100m subscribers worldwide. Paramount’s Paramount+ service has 63m. Combined, the services would still be far smaller than Netflix, which has 247m subscribers and whose number is growing at a rate of 10% a year. The firms could also combine their rival news services, CNN and CBS, to create a global news giant. However, any possible merger would most probably run into regulatory issues over fears that the combined company could control too much of the market in areas such as news. The Biden administration has set a new record for merger enforcement activity, according to an annual report, seen by Bloomberg, expected be released to Congress this week. The US Federal Trade Commission brought 24 enforcement actions, and the justice department’s antitrust division brought 26 in the year to the end of September. It is the highest number of challenges since the US began requiring premerger antitrust review in 1976. Analysts said Paramount was facing substantial pressure from investors to either seek a buyer or forge a strategic partnership after it reported a long-term debt of $15.6bn. Warner is also saddled with debts of $43.5bn. “This potential mega-merger is a significant bellwether for the industry and does increase consolidation momentum even if it doesn’t actually come to fruition,” said Paul Erickson, an analyst at the consultancy Erickson Strategy & Insights. “The mere reality of two major players being driven by mutual challenges and competitive forces to entertain a merger is an indication that collaborations, mergers and acquisitions at all levels may be needed to survive today’s market pressures.” Shareholders did not appear overwhelmed at the prospect of the tie-up. On Wednesday, Warner’s shares were down 6% on the news of merger talks, while Paramount’s fell 2%. On Thursday afternoon, Warner’s shares were down another 4%, while Paramount fell 1%. The merger talks do not come as too much of a surprise to analysts. Zaslav, who was paid $39m last year, has long talked about buying new assets to increase Warner’s content offer. However, any formal tie-up cannot take place until this April at the earliest, as tax rules bar Warner from doing any further deals until two years have passed since its tie-up with Discovery. AT&T’s WarnerMedia unit and Discovery merged to become Warner Bros Discovery in April 2022, bringing together a portfolio that includes the Discovery Channel, Warner Bros Entertainment, CNN, HBO, Cartoon Network; streaming services Discovery+ and Max; and film franchises such as Batman and Harry Potter.