Commentary
Legacy TV-Based Media Caught In No Man's Merger-Land
- by Wayne Friedman , Staff Writer, January 30, 2024
Is time running out on legacy TV-based media companies to merge?
It seems investors aren’t exactly happy with the prospect of companies like Comcast Corp./NBCUniversal, Paramount Global, or Warner Bros. Discovery taking on any more debt. (WBD got a pass of sorts some years ago when buying AT&T-controlled WarnerMedia).
Media stocks are weak, and just headed in the wrong direction.And taking on even more debt in another round of mergers? Investors are thinking, enough -- stop this madness.
“Equity investors have a very limited tolerance for more debt regardless of the strategic rationale,” writes Steven Cahall, media analyst of Wells Fargo Securities, this week. “This means WBD's opportunities are primarily organic.”
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This does not mean that parts of some of these media companies might not be for sale.
Perhaps it could be TV networks, for example -- even as Bob Iger, CEO of Walt Disney toyed with this idea some months ago before pulling back big-time on that conversation.
More recently, Comcast CEO Brian Roberts also said he wasn’t interested.
So what remains?
WBD and others hope to sell more content to other services and platforms like Netflix, thus shorting whatever content Max might need.
It's a reversal of sorts of when legacy media were starting up their streamers.
The positive move here, Cahall says, is that for WBD this means “likely billions of untapped revenue potential.”
On the flip side, he adds that Max needs much more control, estimating the viewing engagement on Max is just 27 minutes a day.
“Management is caught between scaling DTC and deleveraging through licensing deals.” What's the upside? Well, he believes HBO will have a better slate of programming throughout the year -- now that actors' and writers' strikes are behind us.
But challenges remain for WBD and others with the need to address how to handle network TV usage and scale, which continues to drift lower.
In addition, a new NBA rights deal -- with the near certainty of sharply higher right fees -- will yield much lower cash flow in future years.
Everyone wants to play ball here.
Defense or offense? You need to score points... on some side of this contest.
Wayne Friedman is West Coast Editor of MediaPost. You can reach Wayne at wayne@mediapost.com.
I think that Paramount will be sold in piece meal in my opinion I think Sykdance buys Paramount and movie studios, CBS will be sold to someone else in my opinion. WBD they will need to get rid of a lot of the niche cable networks like Paramount as well kinda surprised they didn't do what NBCU did. Freeform is on the last legs along with the other Disney cable networks as when those deals come up they will do what Charter Spectrum did and get rid of those cable TV networks. Maybe other than Comcast maybe scared because they own NBCU why they may not fight like Charter Spectrum did.