The proliferation of streaming services in recent years has transformed the entertainment landscape into a crowded marketplace, with platforms like Netflix, Max, Hulu, Disney+, Paramount+, Prime Video, Peacock, and Apple TV+ vying for consumer attention. However, recent industry developments, including the consolidation of Discovery and Warner Bros., have sparked rumors of a potential merger between Warner Bros. Discovery (WBD) and Paramount Global, indicating a shift in the industry’s trajectory.
Reportedly, WBD CEO David Zaslav and Paramount Global CEO Bob Bakish held discussions regarding the proposed merger earlier this week, fueling speculation about the creation of a formidable player in the streaming arena by combining their services, Max and Paramount+. The prospect of such consolidation, capable of competing with giants like Netflix and Disney, is generating significant interest.
However, not all industry observers are optimistic about the potential merger. Media analyst firm MoffettNathanson expressed skepticism in a research brief, characterizing the rumored talks as a response to desperate times in the media landscape. The analysts caution against potential downsides, such as Paramount’s substantial $15 billion debt and WBD potentially overpaying for a declining linear TV business.
The brief raises concerns about the industry’s current challenges, including linear TV advertising headwinds, cord-cutting trends, and a challenging macroeconomic backdrop. It questions the rationale behind pursuing a merger amid these challenges, likening it to trying to catch a falling knife. Additionally, regulatory hurdles could emerge, given the Biden administration’s cautious approach toward corporate mergers.
While uncertainties abound, MoffettNathanson suggests that the media industry may witness a surge in merger rumors and talks, driven by the increasing desperation of media companies and executives. Despite potential regulatory challenges, the analysts predict a continuation of consolidation discussions in 2024, even in the absence of fundamental reasons for such deals. As of midday trading, shares of both companies were down more than 2%, reflecting the uncertainty surrounding the speculated merger.