Streaming is up; TV is down.
These contrasting tendencies had been behind the 2 greatest company offers within the media and leisure area unveiled in 2024: Skydance Media’s coming takeover of Paramount International and Comcast’s deliberate spinoff of most of its cable networks.
Warner Bros. Discovery signaled that it, too, would swing into the M&A dance in 2025. The corporate in December mentioned it could reorganize into two divisions: one comprising its streaming enterprise (plus HBO) and manufacturing studios and the opposite composed of the remainder of its cable TV networks.
And the erosion of pay TV was behind an M&A occasion that didn’t occur — DirecTV’s supply to accumulate Dish Community, to achieve economies of scale as each attempt to adapt to new streaming realities. DirecTV scrapped the pact in November after Dish bondholders refused to change their present debt for a reduced charge below the DirecTV phrases.
The by line in every case? These are corporations “attempting to shift their strategic positioning from protection to offense,” says Christopher Vollmer, managing director at MediaLink and associate at dad or mum firm UTA. In different phrases, Hollywood gamers wish to strengthen their capacity to compete in a streaming-centric world.
In 2025, with the Trump 2.0 administration anticipated to be friendlier to large mergers than below Biden, the stage is ready for extra dealmaking. “The overwhelming temper is constructive from an M&A perspective,” Vollmer says. “Folks wish to kick off M&A exercise within the first quarter of 2025.”
WBD chief David Zaslav is clearly eyeing some sort of transaction. The reorg, anticipated to be full by midyear, will “create alternatives as we consider all avenues to ship vital shareholder worth,” he mentioned — prompting hypothesis that the corporate may promote or spin off CNN, TBS, TNT and different nets. Zaslav instructed analysts on Warner Bros. Discovery’s Q3 earnings name that the brand new administration “could supply a tempo of change and a chance for consolidation which may be fairly totally different, that would offer an actual constructive and accelerated affect on this business that’s wanted.”
For Skydance, headed by David Ellison, the crucial is to scale up Paramount’s streaming biz and enhance funding in unique content material, whereas slashing prices within the linear TV aspect of the home. The brand new homeowners of Skydance-Paramount may look to promote or spin off a number of the TV portfolio.
“The linear TV world, particularly the cable world, is a declining enterprise — nevertheless it nonetheless generates engaging monetary outcomes,” says John Harrison, EY Americas progress chief for media and leisure. “Non-public fairness loves that sort of asset.”
Comcast’s speculation is that offloading NBCUniversal cable nets together with CNBC, MSNBC and USA will let the corporate give attention to rising Peacock and the Common theme parks. The brand new “SpinCo” is angling to turn into a progress car itself, by shopping for up different properties below the management of NBCU boss Mark Lazarus. However it stays to be seen how an organization reliant on a shrinking base of TV subscribers can discover vital areas of enlargement.
One other issue that might spur media offers is the big quantity of uninvested capital in search of prime investments. International personal fairness and enterprise capital funds held a file $2.62 trillion of whole uncommitted capital (known as “dry powder” within the business) as of July 10, in response to S&P International Market Intelligence and Preqin information.
Wanting acquisitions, business observers see one other potential state of affairs that will alter the media panorama: a three way partnership between two streaming companies. WBD and Comcast have explored a Peacock-Max combo, whereas Jeff Shell, the ex-NBCU chief who’s set to turn into president of Skydance-Paramount, mentioned the brand new firm is open to partnerships to create “the last word [streaming] bundle.”
“The rationalization of the streaming sector has been telegraphed,” Harrison says. However, he provides, forming such a JV is “a super-complex negotiation, and I believe that’s why we haven’t seen that within the U.S. but.”
Shoppers are feeling “subscription fatigue,” topping out at a median of 4 video streaming companies, says Jana Arbanas, principal in Deloitte’s threat and monetary advisory follow. A streaming JV, if executed properly, may reduce churn and maximize return on content material spending. There’s a way of urgency within the business, she says: “Persons are in search of outcomes rapidly.”