Streaming Media Soup
Allen Media makes a run at Paramount.
My guess is that Allen Group has offered Paramount (PARA) enough of an equity premium to get a deal done. I would be surprised if Warner Brothers (WBD) does not bow out. I have not heard rumblings of Disney (DIS), Apple (AAPL), Alphabet (GOOGL) or Amazon (AMZN) sniffing around Paramount.
Warner Brothers ought to move on acquiring Endeavor (EDR), keeping EDR’s live event business (TKO) and spinning out the agency business (recall that WBD tried to acquire WWE before EDR won the bid). Otherwise, Warner Brothers’ next move is likely a sale, most probably to Comcast (CMCSA), as there are no other mid-size content assets that I can think of for Warner Brothers to acquire.
Separately, I am convinced that Disney will not be able to get its Direct-to-Consumer business profitable without new ownership (Disney ran a $2.5 billion operating loss on $19.9 billion of revenue over the last 12 months). With a base of more than 160 million subscribers, Disney’s DTC business (Disney+, Hotstar, Hulu) ought to be well in the black and I say this knowing that the cost of customer acquisition is not inexpensive. However, I believe that legacy studios such as Disney and Paramount have ingrained bad operating habits which make it difficult to become profitable. Disney’s DTC business ought to be run as a lean Technology startup.
The first mistake Disney CEO Bob Iger made was to acquire BAMTech Media from Major League Baseball to build Disney+ on top of rather than build Disney+ on top of AWS as Netflix (NFLX) did. If one compares Disney’s content portfolio to Netflix, there is no comparison. Yet Iger is allowing his legacy linear business including ESPN distract from his DTC business, thereby ruining the perception of the DTC business with investors and crushing the Company’s equity value.
I believe that once the Biden Administration and FTC head Lina Khan are gone, someone will make a run at Disney in 2025. Apple (AAPL) is the best fit, but Amazon is far more aggressive on the M&A front (see AMZN’s MGM acquisition).