Media Companies Are Ready to Sell. Does Anyone Want to Buy?

[TheBigA]

So fewer resources, fewer employees on fewer platforms while Zaslav's massive and undeserved salary is unchanged? Again, how the consumer benefit here?

You make this sound like doing business is a reality TV show where we all get to vote on how much people make. It doesn't work that way. The CEO makes whatever he makes. That's not subject to government or consumer approval. If a group wants to challenge a possible merger, if and when it happens, they're free to do so. At one time the government forced a certain level of staffing at railroad companies. You see where we are today.

CBS is still very valuable on its own and would be snapped up by Nexstar in a heartbeat.

So that Nexstar could do basically the same thing WBD would do? I don't see the difference.

 

[Rusty Muck]

You make this sound like doing business is a reality TV show where we all get to vote on how much people make. It doesn't work that way. The CEO makes whatever he makes. That's not subject to government or consumer approval. If a group wants to challenge a possible merger, if and when it happens, they're free to do so. At one time the government forced a certain level of staffing at railroad companies. You see where we are today.

The Penn Central merger disaster is a good comparison. Two companies that were faltering with bad debt, an eroded consumer base and entirely different corporate cultures merged and promptly filed for bankruptcy less than a year later.

So that Nexstar could do basically the same thing WBD would do? I don't see the difference.

It makes as much sense as WBD buying Paramount, that's for sure.

 

[Rusty Muck]

Meanwhile Wall Street investors are cooling big-time on this merger and are themselves befuddled as to why this deal is even a thing:

‘Warnamount’ Merger Talk Confounds Investors And Industry: “Why Would Any Company Try To Catch A Falling Knife?”

Warner Bros. Discovery CEO David Zaslav is eyeing a merger with Paramount, but is M&A the best path for legacy media now?

deadline.com

One film finance exec told Deadline he was struggling to see the logic. “What I want to know is…how are shareholders going to benefit?” he said. “How do these two companies pay down their debt…and build value so their share price, which has been in the toilet, can grow?”

“It’s almost like in that movie scene where everyone’s got their hands up in the air, and they’re…running around in circles, they don’t know what to do,” said LightShed Partners’ Rich Greenfield on CNBC about the Par-WBD chatter.

“Advertising is in secular decline. Cord-cutting is worse than these companies expected. Streaming losses are in the billions. I think this is really sort of an ‘aha’ moment, an inflection point, a watershed moment…where they’re realizing there is no growth.” Piling linear TV assets atop linear TV assets “is not the right answer. That is not fixing the problem. The problem is they can’t compete with Netflix.”

If Wall Street can't even get behind this, then it's doomed before it begins.

 

[michael hagerty]

Meanwhile Wall Street investors are cooling big-time on this merger and are themselves befuddled as to why this deal is even a thing:

‘Warnamount’ Merger Talk Confounds Investors And Industry: “Why Would Any Company Try To Catch A Falling Knife?”

Warner Bros. Discovery CEO David Zaslav is eyeing a merger with Paramount, but is M&A the best path for legacy media now?

deadline.com

If Wall Street can't even get behind this, then it's doomed before it begins.

A pull quote from that Deadline piece:

A merged company might try investors’ patience, but the industry couldn’t help drawing on a white board to imagine how the pieces could be combined. Paramount+, which has 63 million subscribers but still loses money, could be shut down to save costs, with some of its top shows migrating to Warner Bros. Discovery’s Max, industry players speculate.

On the TV side, a deal would bring some gold-plated TV IP to Warner Bros., including Star Trek, NCIS and the Aaron Spelling library.

It would finally align Warner Bros. TV with a major broadcast network. The studio previously owned the WB and later half of The CW, neither of which rose to the level of the Big 3.

And combining CBS News and CNN would create a TV news powerhouse. The two have flirted with a merger for more than two decades while collaborating on newsgathering.

A combination gives WBD more marquee sports rights, including NFL. WBD’s Turner networks already share NCAA March Madness with CBS.

 

[tall_guy1]

Couldn't they instead just purchase their entire streaming library/service? I would see no use to them purchasing a station that plays non-stop "Ridiculousness."

 

[Rusty Muck]

A pull quote from that Deadline piece:

A merged company might try investors’ patience, but the industry couldn’t help drawing on a white board to imagine how the pieces could be combined. Paramount+, which has 63 million subscribers but still loses money, could be shut down to save costs, with some of its top shows migrating to Warner Bros. Discovery’s Max, industry players speculate.

On the TV side, a deal would bring some gold-plated TV IP to Warner Bros., including Star Trek, NCIS and the Aaron Spelling library.

It would finally align Warner Bros. TV with a major broadcast network. The studio previously owned the WB and later half of The CW, neither of which rose to the level of the Big 3.

And combining CBS News and CNN would create a TV news powerhouse. The two have flirted with a merger for more than two decades while collaborating on newsgathering.

A combination gives WBD more marquee sports rights, including NFL. WBD’s Turner networks already share NCAA March Madness with CBS.

And yet, investors can't find a reason to get behind this deal, which should really tell you something. From the same article:

Ultimately, however, a true merger would create an ultimate situation of less product in the marketplace. That means less money for exhibitors, and less for producers, writers and talent. Long-term output deals on streaming and TV would merge.

“Creating less product and room in the marketplace, that’s exactly when antirust law is supposed to step in,” says one studio insider.

 

[TheBigA]

Ultimately, however, a true merger would create an ultimate situation of less product in the marketplace. That means less money for exhibitors, and less for producers, writers and talent. Long-term output deals on streaming and TV would merge.

The assumption here is that no new companies would form to fill the expected void. Which we all know is poppycock.

We're talking about aging dinosaurs. At some point, they become fuel for my SUV. Creativity is not something that gets constrained or limited because of aging dinosaurs. The history of the movie business is built upon mergers and acquisitions. Along the way, the people who lose their jobs start new companies and make new deals. That's how Skydance became a player. If you have a great idea, all you really need is funding. If it comes from a studio, fine. But there are other ways to finance movies and other video. That's what the Executive Producer does.

Look: Through a variety of circumstances, I'm actually a stockholder in both companies. Am I happy to see WBD go deeper in debt? No. Is there anything I can do to stop it? No.

 

[Rusty Muck]

The assumption here is that no new companies would form to fill the expected void. Which we all know is poppycock.

We're talking about aging dinosaurs. At some point, they become fuel for my SUV. Creativity is not something that gets constrained or limited because of aging dinosaurs. The history of the movie business is built upon mergers and acquisitions. Along the way, the people who lose their jobs start new companies and make new deals. That's how Skydance became a player.

So if they're aging dinosaurs, then what is the reason for investors and bankers... or just about anyone... to back this deal? Combining two dinosaurs only creates a bigger dinosaur that will have a more spectacular death. Nothing more. Again, look at the Penn Central merger disaster of 1969.

And if studios are dinosaurs, then what incentive is there for any new studio to want to emerge? A24 is reliant on WBD for distribution. Annapurna is effectively subsidized by Megan Ellison's father.

If you have a great idea, all you really need is funding. If it comes from a studio, fine. But there are other ways to finance movies and other video. That's what the Executive Producer does.

In an ideal world, sure.

 

[TheBigA]

So if they're aging dinosaurs, then what is the reason for investors and bankers... or just about anyone... to back this deal?

As I keep saying, I don't think we're there yet. It's all very early speculation. You see what happened when Iger opened his mouth.

In an ideal world, sure.

There are people who make a living bringing producers together with money. It happens every day within the system and without.

 

[Rusty Muck]

As I keep saying, I don't think we're there yet. It's all very early speculation. You see what happened when Iger opened his mouth.

Judging by the falling stock prices for both companies since the announcement, it looks like Wall Street has already reached a verdict, speculation or no speculation.

 

[TheBigA]

Judging by the falling stock prices for both companies since the announcement, it looks like Wall Street has already reached a verdict, speculation or no speculation.

As I said I'm a stockholder in both companies and I'm well aware of it.

 

[Kelly A]

Judging by the falling stock prices for both companies since the announcement, it looks like Wall Street has already reached a verdict, speculation or no speculation.

As several of us have said prior; if you look at the way media stocks have been trending, it's no surprise that overall stocks have been down. Sometimes Wall St. looks at mergers, or just merger talks as something positive and may give both a boost. Guess we'll see.
The other factor in merger talks is it forces analysts to show their cards when it comes to their opinion about a particular industry as a whole.

 

[michael hagerty]

This really comes down to streaming. Only one legacy network has a strong streaming platform---ABC with Hulu/Disney+. CBS is nowhere with Paramount+ and NBCUniversal is maybe even worse off with Peacock.

A deal with WBD for either of those gives them an already, albeit recently, profitable and competitive platform---Max.

Expect all three companies (if NBCUniversal gets involved) to make as strong a case to their stockholders as possible that this is what keeps them from being relegated to an extra-cost or free tier buried inside Amazon while Amazon, Netflix and Hulu/Disney run away with all the money.

 

[Rusty Muck]

This really comes down to streaming. Only one legacy network has a strong streaming platform---ABC with Hulu/Disney+. CBS is nowhere with Paramount+ and NBCUniversal is maybe even worse off with Peacock.

A deal with WBD for either of those gives them an already, albeit recently, profitable and competitive platform---Max.

Expect all three companies (if NBCUniversal gets involved) to make as strong a case to their stockholders as possible that this is what keeps them from being relegated to an extra-cost or free tier buried inside Amazon while Amazon, Netflix and Hulu/Disney run away with all the money.

Merging streamers while assuming the dead weight of hundreds of cable channels in a cord-cutting world, along with a broadcast network and chain of O&Os, is the definition of insanity.

 

[michael hagerty]

Merging streamers while assuming the dead weight of hundreds of cable channels in a cord-cutting world, along with a broadcast network and chain of O&Os, is the definition of insanity.

Who says they don't spin the hundreds of cable channels? Besides being a good idea, I think that would be really high on the DOJ's list of requirements. And the earlier pieces I've posted over the last week included the solid likelihood that Shari would sell the CBS O&Os to a third party, positioning the broadcast network for a smoother path to a pure streaming play.

 

[TheBigA]

Expect all three companies (if NBCUniversal gets involved) to make as strong a case to their stockholders as possible that this is what keeps them from being relegated to an extra-cost or free tier buried inside Amazon while Amazon, Netflix and Hulu/Disney run away with all the money.

My view on video streaming is there needs to be a way to combine them into one package, the way cable combined competing channels and services. We're in the early stages of this business, and I understand why everyone wants to make their square foot appear to be the best and try to keep all the money. But at some point, there are just too many monthly subscriptions.

We're talking about how combining two studios is anti-competitive. But in the real world a combined WBD & Paramount STILL has to compete against the trillion dollar tech companies like Amazon and Apple for the rights to big events. That's more of an issue for the DOJ than the possible merger of the aging dinosaurs.

 

[michael hagerty]

My view on video streaming is there needs to be a way to combine them into one package, the way cable combined competing channels and services. We're in the early stages of this business, and I understand why everyone wants to make their square foot appear to be the best and try to keep all the money.

You're not wrong, but I doubt you'll ever get below three major streamers---Amazon because it's part of Prime, Netflix and Hulu/Disney.

My money is that there's actually four, with Max, unless WBD screws it up somehow.

Absent a merger, Paramount+ and Peacock are either ad-supported or paid tiers buried inside Amazon next to Starz and Britbox.

Apple+ is the wild card. Apple can afford to run it as a boutique, but if the oft-fantasized Apple/Disney merger ever happens, they're suddenly a monster.

We're talking about how combining two studios is anti-competitive. But in the real world a combined WBD & Paramount STILL has to compete against the trillion dollar tech companies like Amazon and Apple for the rights to big events. That's more of an issue for the DOJ than the possible merger of the aging dinosaurs.

Yeah, I don't think there's that big a deal when it comes to Paramount merging with any other studio. They're in danger of becoming the next MGM or UA or (name another once-major studio).

Your example of Amazon and Apple is dead on. The scale at which these companies have to operate to be successful has grown exponentially.

 

[Rusty Muck]

Who says they don't spin the hundreds of cable channels? Besides being a good idea, I think that would be really high on the DOJ's list of requirements.

Who'd want the cable channels if the IP wouldn't be a part of it? And including the IP in a sale of the cable channels would defeat the purpose of the merger if you just want the IP for streaming.

Moreover, who in their right mind would want to buy cable channels in a cord-cutting world in the first place?

And the earlier pieces I've posted over the last week included the solid likelihood that Shari would sell the CBS O&Os to a third party, positioning the broadcast network for a smoother path to a pure streaming play.

The O&Os are worthless without the network.

 

[Rusty Muck]

My view on video streaming is there needs to be a way to combine them into one package, the way cable combined competing channels and services. We're in the early stages of this business, and I understand why everyone wants to make their square foot appear to be the best and try to keep all the money. But at some point, there are just too many monthly subscriptions.

They could agree to merge the streamers into a collective unit without merging the companies themselves—you know, how Hulu was originally conceived as—but that's just crazy talk, apparently.

We're talking about how combining two studios is anti-competitive. But in the real world a combined WBD & Paramount STILL has to compete against the trillion dollar tech companies like Amazon and Apple for the rights to big events. That's more of an issue for the DOJ than the possible merger of the aging dinosaurs.

Again, what is the benefit of merging two dinosaurs into one larger dinosaur? All you'll get is a company that fails harder and faster and they get incorporated into Amazon Prime and Apple TV anyway.

 

[TheBigA]

Again, what is the benefit of merging two dinosaurs into one larger dinosaur? All you'll get is a company that fails harder and faster and they get incorporated into Amazon Prime and Apple TV anyway.

Mergers and acquisitions haven't really been the Amazon & Apple business models. Their brand is that strong. They just decide they're going to compete for the NFL, and they have more money than anyone else. They really don't have to buy ESPN to get those rights. As I said, no matter how big WBD becomes, it's still dwarfed by the tech companies.