• by Wayne Friedman , February 1, 2024

A sale of Paramount Global to any big legacy TV-based media or digital-first company will continue to be an uncertain situation, according to Bernstein Research.

“Without a clear buyer/structure, the outcome is still up in the air,” writes Laurent Yoon, media analyst at Bernstein. “It could limp along for a while and requires a risk-taker with a lot of money to burn.” 

Analyzing major legacy media players doesn’t seem like a good fit currently. Take Comcast’s NBCUniversal:

“Paramount’s subscaled DTC [direct to consumer business]  doesn’t sufficiently beef up [NBCU’s] Peacock to enable it to compete effectively with the two leaders in the streaming world, or to enable it to offset the combined entity’s linear exposure,” he says.

Yoon adds that the combined Paramount+ and Peacock subscribers, after accounting for overlap but before accounting for churn, will be just 76 million. That is 50% of what Walt Disney’s Disney+ has and 30% of Netflix’s subscribers.

He says the combined companies will only yield a low 48% “engagement by subscriber” index (to that of Netflix). In other words, a low viewing measurement of content.

Looking at a possible Warner Bros. Discovery acquisition, Bernstein projected a higher engagement index score in a WBD-Paramount merger -- 70%.

But combining the two companies' streamers, Paramount+ and Max, “we expect revenue cannibalization of around $3 billion after accounting for the higher churn from Paramount+ with [Max] already one of the most expensive DTC service.”

The bottom line comes down to this: “What gives us pause on the deal, however, ultimately, is that combining Max and Paramount+ isn’t sufficient to offset the linear exposure of the combined entities.”

Bernstein also rules out a Walt Disney deal because with its Disney+ and Hulu, this company’s D2C businesses already has relatively large scale -- 150 million global subscribers -- as well as  sizable content and IP.

As for Fox Corp., Yoon believes the company doesn’t have any significant premium streaming platform business.

Examining digital-first media companies, Yoon says, “the only assets that interest the tech players such as Amazon, or a pure streaming leader like Netflix, is Paramount Studios. Yet, no doubt the Redstone family wants to get paid for its linear assets, and has so far rebuffed any attempt to buy just the studios business.”

As yet, Bernstein has not made any analysis of a bid from Allen Media Group's $14 billion proposed deal ($30 billion overall when including Paramount Global’s debt).

One longtime media investor, Mario Gabelli told the New York Post this week that:  “I like the fact Byron [Allen, CEO of Allen Media Group] is offering all Paramount shareholders a premium... But show me the money. You don’t know where Byron is getting the money from.”