The Paramount Studios in Los Angeles, California, USA on Monday, April 29, 2024.
Eric Thayer | Bloomberg | Getty Images
Paramount Global is in talks with other entertainment companies to merge its Paramount+ streaming service with an existing platform. If a deal is reached, it could start a new wave of streaming partnerships that could put the entire media industry on a firmer footing.
Paramount Global leadership is in active discussions with other media and technology company executives to determine whether a structure makes sense for both parties where Paramount+ could merge with another streaming entity and potentially be co-owned, according to people familiar with the matter. the subject, who asked not to be named because the discussions are private.
One of the companies that has expressed the desire to reach an agreement is Discovery by Warner Bros, according to people familiar with the matter. The combination of Max and Paramount+ could strengthen both services by allowing them to better compete Netflix and by Disney suite of platforms (Disney+, Hulu and ESPN) for eyeballs and future content.
Warner Bros. Discovery held preliminary merger talks for a deal for all of Paramount Global earlier this year, but talks did not escalate.
Paramount Global is also looking at partnering with a technology platform, company co-CEO Chris McCarthy said at an employee town hall on June 25.
“What they don’t have is the scale of our content, and together we’re going to make a very powerful combination to get more minutes and bigger profits,” McCarthy said of a potential technology partner at the town hall, according to a transcript of the event obtained by CNBC.
A merged streaming service would ease the churn by giving customers more diverse programming and fewer reasons to cancel each month, and could take Paramount+ losses off Paramount Global’s balance sheet by giving it new ownership.
Although the structure for a hypothetical joint venture with Warner Bros. Discovery has not been discussed in detail, ownership likely would not be 50-50 split given the existing nature of the streaming assets and their finances, according to people familiar with the discussions.
The direct-to-consumer business of Warner Bros. Discovery had annual adjusted EBITDA of $103 million in 2023, after losing $2.1 billion the previous year. Paramount Global reported a loss of $1.67 billion in direct-to-consumer operating income before amortization in 2023, down from losses of $1.8 billion a year earlier.
Max has approximately 100 million subscribers worldwide, with 52.7 million based in the US. Paramount+ closed the first quarter with 71 million subscribers.
of Comcast NBCUniversal has also expressed interest in a joint venture with Paramount+, according to The Wall Street Journal reported for the first time earlier this year. The talks did not progress and never got very far, according to people familiar with the matter.
“The sheer amount of content we could offer together would be huge in TV, film and sports and would bring in millions of viewers,” McCarthy said during the town hall, referring to a potential partnership with an existing subscription streaming service such as Max or Peacock. “In addition, we will share all other non-content costs.”
The representatives of Warner Bros. Discovery, NBCUniversal and Paramount Global declined to comment.
Streaming 2.0
As of late 2019, traditional media companies such as Paramount Global, Disney, NBCUniversal and Warner Bros. Discovery, all launched streaming services that have bled billions of dollars in losses.
There has long been industry consensus that there are too many streaming services relative to the number of total paying customers. Many executives have speculated that only four or five global services can likely survive and thrive. The others should be integrated or folded into existing platforms.
“There may be some combination of Paramount, Peacock and Max,” Peter Chernin, former chief executive and chairman of Fox Group, said in a interview on CNBC last year.
If Paramount reaches a deal for a joint venture with either Max or Peacock, it will put additional pressure on whichever agency fails to make a deal on its own.
Media companies are now focused 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 rival streaming services, like Netflixto 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 a month.
Disney and Warner Bros. Discovery have announced plans to combine their streaming services from the summer. While the companies have yet to announce a price for the bundle, which will include Disney+, Hulu and Max, the discount will be “significant,” according to one of the people familiar with the matter.
Better windows
Another hot topic of current debate revolves around the production of movies and TV series through different streaming services at different price points.
This idea was something that Skydance Media, which almost bought Paramount Global in the past, considered talks collapsed last month.
Skydance’s plan for Paramount included 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 prestige dramas to create a stand-alone ad-free service.
A different ad-supported service could then feature live sports and premium windowed originals, which could appear on the second service after a certain amount of time. The services could be bundled together, similar to how Disney bundles Disney+, Hulu and ESPN+.
A representative for Skydance declined to comment.
An application experience
There is a widespread consensus among traditional media leaders that better packaging of existing content can be more profitable for the entire industry.
The downside of a larger content grouping or window is customer confusion. Increased 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 could eventually combine their programming into one app to ease confusion and compete with Netflix, which dominates the subscription streaming industry with approximately 270 million global subscribers.
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 that contributed content to the streaming app could share the revenue, similar to how budget cable systems operate today, they added.
However, corporate rivalries and tensions can make such a product difficult to put together. While Max and Disney have struck a combination deal, Comcast and Disney have long had a strained relationship. The two parties are currently trying to relax a joint venture — Hulu — to give Disney full control of the service originally co-owned by NBCUniversal, Fox and Disney.
Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.
