Paramount Studios in Los Angeles, California, United States, on Monday, April 29, 2024.
Eric Thayer | Bloomberg | Getty Images
According to sources close to the matter, Warner Bros. Discovery is among the companies that have expressed interest in reaching a deal. The merger of Max and Paramount+ could strengthen both services by allowing them to better compete with Netflix and Disney’s suite of platforms (Disney+, Hulu and ESPN) for audience and future content.
Warner Bros. Discovery held preliminary merger discussions for a deal for all of Paramount Global earlier this year, but the talks have not progressed.
Paramount Global is also considering partnering with a technology platform, company co-CEO Chris McCarthy said during a June 25 town hall meeting with employees.
“What they don’t have is our content scale, and together we will create a very powerful combination to drive more minutes and greater profits,” McCarthy said of a potential city hall tech partner, according to a transcript of the event obtained by CNBC.
A merged streaming service would mitigate churn by giving customers more diverse programming and fewer reasons to cancel each month, and it could reduce Paramount+’s losses from Paramount Global’s balance sheet by giving it a new owner.
While a structure for a hypothetical joint venture with Warner Bros. Discovery has not been discussed in detail, ownership likely would not be split 50-50 given the existing nature of the streaming assets and their finances, according to people familiar with the discussions.
Warner Bros. Discovery’s direct-to-consumer business generated $103 million in annual adjusted EBITDA in 2023, after losing $2.1 billion the year before. Paramount Global reported a loss of $1.67 billion in operating income before depreciation and amortization in 2023, narrowing from its loss of $1.8 billion a year earlier.
Max has around 100 million subscribers worldwide, including 52.7 million in the United States. Paramount+ ended its first quarter with 71 million.
Comcast’s NBCUniversal also expressed interest in a joint venture with Paramount+, as The Wall Street Journal first reported earlier this year. The talks failed to progress and never came to fruition, according to people familiar with the matter.
“The volume of blockbuster content we could deliver together would be enormous across television, film and sports, attracting millions of viewers,” McCarthy said at the town hall meeting on the partnership with a streaming service. existing subscription streaming like Max or Peacock. “Plus, we would share all other non-content expenses. »
Spokespeople for Warner Bros. Discovery, NBCUniversal and Paramount Global declined to comment.
Since late 2019, traditional media companies including Paramount Global, Disney, NBCUniversal and Warner Bros. Discovery, all launched streaming services that resulted in billions of dollars in losses.
There has long been a consensus in the industry that there are too many streaming services relative to the number of paying customers. Many executives have speculated that only four or five global services could likely survive and thrive. The rest would have to be consolidated or integrated into existing platforms.
“There could be a combination of Paramount, Peacock and Max,” Peter Chernin, former Fox Group CEO and chairman, said in an interview with CNBC last year.
If Paramount does reach an agreement on a joint venture with Max or Peacock, there will be even more pressure on the left-behind service to strike its own deal.
Media companies are now focusing on better monetizing streaming content through bundles and partnerships. Disney and Warner Bros. Discovery have recently become more willing to license some of their content to competing streaming services, such as Netflix, in order to better monetize shows that don’t add many new subscribers to their streaming services.
Comcast recently introduced a bundle of Peacock, Netflix and Apple TV+ for its cable, broadband and mobile customers for $15 per month.
Disney and Warner Bros. Discovery have announced plans to consolidate their streaming services starting this summer. Although the companies have not yet announced the price of the package, which will include Disney+, Hulu and Max, the discount will be “significant,” according to one of the people in the know.
Another hot topic in current discussions is the windowing of movies and TV series through different streaming services at different price points.
It’s an idea being considered by Skydance Media, which nearly acquired Paramount Global before negotiations collapsed last month.
Skydance’s plan for Paramount called for merging Paramount+ with another streamer to create new streaming services that would better streamline assets, according to people familiar with the matter.
For example, Paramount’s Showtime library could be combined with another company’s prestigious programs to create a stand-alone, ad-free service.
Another ad-supported service could then contain live sporting events and prestigious original programs in windowed mode, which could appear on the second service after a period of time. The services could be bundled together, like Disney bundles Disney+, Hulu and ESPN+.
A Skydance representative declined to comment.
There is a widespread sentiment among traditional media executives that better packaging of existing content can be more lucrative for the industry as a whole.
The downside to increased bundling or windowing of content is customer confusion. The increase in mix-and-match offerings between streaming services can easily lead to customer frustration rather than satisfaction.
Several media executives have said privately that they expect Peacock, Paramount+, Max and Disney to eventually consolidate their programming into a single app to ease confusion and compete with Netflix, which dominates the subscription streaming industry with about 270 million subscribers worldwide.
Two executives said Disney would be the most likely company to own the app, given its relative dominance in the entertainment streaming industry. Any media company contributing content to the streaming app could share in the revenue, similar to how the cable economy works today.
However, rivalries and tensions between the companies could make it difficult to get such a product off the ground. While Max and Disney have a deal to combine, Comcast and Disney have long had a strained relationship. The two sides are currently trying to break up a joint venture — Hulu — to give Disney full control of the service that was originally jointly owned by NBCUniversal, Fox and Disney.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.