Shari Redstone, chairwoman of ViacomCBS and president of Nationwide Amusements, reacts as she celebrates her firm’s merger on the Nasdaq Market web site in New York, December 5, 2019.
Brendan McDermid | Reuters
Within the phrases of the nice Tom Lehrer, “Who’s Subsequent?“
Now that AT&T has determined to separate WarnerMedia and merge with Discovery, the remainder of the media world — significantly the smaller gamers — face new strain to make their countermoves.
Even earlier than this deal, it was clear that Lionsgate, MGM, Sony Photos and AMC Networks have been in all probability too small to compete in a streaming world the place success is dependent upon an enormous retailer of content material and world attain.
However ViacomCBS and Comcast‘s NBCUniversal are a lot greater, and doubtless assumed that they had a while — not less than a 12 months — to see what number of subscribers signed up for his or her streaming choices, Paramount+ and Peacock.
“Inside the subsequent two years, it’ll be put up or shut up for all of us,” stated David Zaslav, Discovery’s CEO who will take the highest job on the mixed firm, in December. “Are you able to present you are scaling? Are you going to be a participant within the U.S.? Are you going to be a participant all over the world?”
That timeline is shorter now.
Instantly, each ViacomCBS and NBCUniversal appear subscale in contrast as they try to put collectively world streaming companies. They don’t seem to be attempting to be area of interest gamers, akin to Starz or AMC+.
The plain transfer could be for ViacomCBS and NBCUniversal to merge. However a mixed ViacomCBS/NBCUniversal would have two U.S. broadcast networks — CBS and NBC — housed below the identical company roof. That will not fly with U.S. regulators. Whereas the dad or mum firms might theoretically spin out or promote them, the published networks present a lot worth to each firms — and their streaming companies — that it appears unlikely.
Additional, Shari Redstone controls ViacomCBS and Brian Roberts controls NBCUniversal by way of his household’s Comcast shares. Their twin class share construction is one other impediment for each firms, because it makes it exhausting for outsiders to strain the businesses to make modifications the executives do not favor. Nevertheless it’s not a deal stopper — Discovery had a number of lessons of shares too, however John Malone was keen to remove his voting shares to get a deal performed with WarnerMedia.
That leaves Comcast and ViacomCBS with 4 probably choices.
Purchase. If each firms really feel their streaming companies can compete all over the world, they will go on world and home acquisition sprees. It could take a number of offers to get to a scaled place, as they piece collectively smaller U.S.-based belongings and bigger world media firms in Latin America and Europe.
Promote. They may additionally promote. Shari Redstone is extra open to the concept of promoting ViacomCBS than her father, in line with folks accustomed to the matter. It is unclear if Roberts would take into account promoting NBCUniversal. Potential consumers might embody Amazon or the newly merged WarnerMedia-Discovery. Apple and Netflix proceed to hover alongside the periphery, however neither firm has ever proven a lot curiosity in making large media acquisitions.
Scale back their ambitions. The third possibility is to throw within the towel on being a world streaming service. As an alternative, NBCUniversal and ViacomCBS might license their content material to different, bigger streamers and wind down Paramount+ and Peacock in the event that they fail to realize world traction.
Bundle. Possibility 4 is comparable however much less drastic. ViacomCBS and NBCUniversal might start bundling their streaming companies collectively or discovering new streaming companions to extend world distribution by way of discounted choices. The primary drawback with this technique is it limits the upside for each firms, who will not be capable to compete with bigger gamers for high content material and breadth of programming.
The fifth possibility — inaction — is not a viable technique. The strain is on Roberts, NBCUniversal CEO Jeff Shell, Redstone and ViacomCBS CEO Bob Bakish to seek out thrilling go-forward options for his or her firms.
Disclosure: Comcast owns NBCUniversal, the dad or mum firm of CNBC.
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