Paramount wants a broadcast partner. Warner Bros. Discover is interested

Paramount Global is holding talks with other entertainment companies about merging its Paramount+ streaming service with an existing platform. If it reaches a deal, it could start a new wave of broadcast partnerships that could put the entire media industry on a stronger footing.

Paramount Global management is in active discussions with executives from other media and technology companies to determine whether a structure makes sense for both parties where Paramount+ could merge with another broadcaster and potentially co-own, according to people familiar with the matter. this issue, 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 Warner Bros. Discovery, according to people familiar with the matter. The combination of Max and Paramount+ could strengthen both services allowing them to better compete Netflix AND of Disney set of platforms (Disney+, Hulu and ESPN) for eyes and future content.

Warner Bros. Discovery held preliminary merger talks on a deal for all of Paramount Global earlier this year, but talks did not escalate.

Paramount Global is also considering 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 our scale of content, and together we’re going to make a very powerful combination to drive more minutes and bigger profits,” McCarthy said of a potential technology partner at City Hall, according to a transcript of Event picked up by CNBC.

A unified streaming service would mitigate the disruption by giving customers more diverse programming and fewer reasons to cancel each month, and could take Paramount+’s losses off Paramount Global’s balance sheet by giving it new ownership.

While a structure for a hypothetical joint venture with Warner Bros. Discovery has not been discussed in detail, with ownership likely not being a 50-50 split given the existing nature of the broadcast assets and their finances, according to people familiar with the discussions.

Warner Bros. direct-to-consumer business. Discovery earned $103 million in adjusted annual EBITDA in 2023, after losing $2.1 billion a year earlier. Paramount Global reported a $1.67 billion loss in direct-to-consumer operating income before depreciation and amortization in 2023, narrower than its $1.8 billion loss a year earlier.

Max has nearly 100 million global subscribers, with 52.7 million located in the U.S. Paramount+ ended the first quarter with 71 million.

Comcast’s NBCUniversal has also expressed interest in a joint venture with Paramount+, as the Wall Street Journal first reported earlier this year. The talks did not progress and never got particularly far, according to people familiar with the matter.

“The sheer volume of hit content we can deliver together would be incredible across TV, film and sports, and would attract millions of viewers,” McCarthy said during the town hall of the partnership with an existing subscription streaming service. like Max or Peacock. “Plus, we’ll share in all the other expenses without content.”

Spokesmen for Warner Bros. Discovery, NBCUniversal and Paramount Global declined to comment.

As of late 2019, traditional media companies including Paramount Global, Disney, NBCUniversal and Warner Bros. Discovery, have all launched streaming services that have been hemorrhaging billions of dollars in losses.

There has long been industry consensus that there are too many streaming services relative to the amount of paying customers. Many executives have speculated that only four or five global services are likely to survive and thrive. Others will need to be consolidated or folded into existing platforms.

“There could be a combination of Paramount, Peacock and Max,” Peter Chernin, the former CEO and chairman of Fox Group, said in an interview with CNBC last year.

If Paramount reaches a deal for a joint venture with either Max or Peacock, there will be increased pressure on whichever service is left out to do a deal on its own.

Media companies are now focused on better monetizing broadcast content through packages and partnerships. Disney and Warner Bros. Discovery has recently become more willing to license some of its content to rival streaming services, such as Netflix, to better monetize shows that aren’t adding many new subscribers to their streaming services.

Comcast recently introduced a bundle with Peacock, Netflix and Apple TV+ for its cable, broadband and mobile customers for $15 a month.

Disney and Warner Bros. Discovery announced plans to merge their streaming services starting this summer. While the companies have not yet announced 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.

Another hot topic of current discussion revolves around showing movies and TV series through different streaming services at different prices.

That was something considered by Skydance Media, which almost bought Paramount Global before talks broke down last month.

Skydance’s plan for Paramount included merging Paramount+ with another broadcaster to create new streaming services that would better rationalize assets, according to people familiar with the matter.

For example, Paramount’s Showtime library can be combined with another company’s prestigious dramas to create a stand-alone ad-free service.

Another ad-supported service may then feature live and premium windowed sports originals, which may be shown on the second service after a certain time. Services can be bundled together, like how Disney bundles Disney+, Hulu, and ESPN+.

A representative for Skydance declined to comment.

There is a widespread shared feeling among traditional media leadership that better packaging of existing content can be more profitable for the entire industry.

The downside to more content stacking or windows is customer confusion. The increase in mix-and-match offerings between streaming services can easily lead to frustration rather than customer satisfaction.

Some media executives said privately that they expect Peacock, Paramount+, Max and Disney to eventually merge their programming into one app to ease confusion and compete with Netflix, which dominates the subscription streaming industry with about 270 million subscribers. global.

Two executives said Disney would be the most likely company to own the app, given its relatively dominant position in the entertainment streaming industry. Any media company that contributed content to the streaming app could share the revenue, similar to how the cable economy works today.

However, rivalries and company tensions can make it difficult to create such a product. While Max and Disney have reached a packaging deal, Comcast and Disney have long had a strained relationship. The two sides are currently trying to launch a joint venture — Hulu — to give Disney full control over the service that was originally co-owned by NBCUniversal, Fox and Disney.

Disclosure: Comcast’s NBCUniversal is the parent company of CNBC.