Shari Redstone, President of ViacomCBS and President of National Amusements, reacts as she celebrates her company’s merger on the Nasdaq market site in New York on December 5, 2019.
Brendan McDermid | Reuters
In the words of the great Tom Lehrer, “Who’s next?”
Now that AT&T has decided to separate WarnerMedia and merge with Discovery, the rest of the media world, particularly the smaller players, is facing new pressure to make their counterattacks.
Even before this deal, it was clear that Lionsgate, MGM, Sony Pictures, and AMC Networks were probably too small to compete in a streaming world where success depends on a large amount of content and global reach.
But Comcast’s ViacomCBS and NBCUniversal are much bigger and they probably assumed they had some time, at least a year, to see how many subscribers signed up for their streaming offerings, Paramount + and Peacock.
“In the next two years, all of us are going to shut it down or shut it down,” David Zaslav, Discovery’s chief executive officer, who will assume the top job in the combined company, said in December. “Can you show that you are climbing? Are you going to be a gamer in the United States? Are you going to be a player around the world? “
That timeline is shorter now.
Suddenly, both ViacomCBS and NBCUniversal appear to be on a subscale as they try to put together global streaming services. They are not trying to be niche players, like Starz or AMC +.
That means both will need more content to compete against Netflix, Amazon Prime Video, Disney, and whatever the new name for WarnerMediaDiscovery is.
The obvious move would be for ViacomCBS and NBCUniversal to merge. But a ViacomCBS / NBCUniversal combination would have two US broadcast networks, CBS and NBC, located under the same corporate roof. That won’t work with US regulators. While the parent companies could theoretically spin them off or sell them, the transmission networks provide so much value to both companies, and their transmission services, that it seems unlikely.
Additionally, President Shari Redstone controls ViacomCBS and Comcast President Brian Roberts controls NBCUniversal through his family’s Comcast shares. Their dual-class stock structure is another hurdle for both companies, making it difficult for outsiders to pressure companies to make changes that executives don’t favor. But it’s not an impediment to the deal: Discovery also had several classes of shares, but John Malone was willing to eliminate his voting shares to close a deal with WarnerMedia.
That leaves Comcast and ViacomCBS with four possible options.
To buy. If both companies feel that their streaming services can compete around the world, they can make national and international acquisitions. Multiple deals may be required to reach an escalated position, linking smaller US-based assets and larger global media companies in Latin America and Europe.
To sell. They could also sell. Redstone is more open to the idea of selling ViacomCBS than her late father, Sumner Redstone, the former president, according to people familiar with the matter. It’s unclear whether Roberts would consider selling NBCUniversal. Potential buyers could include Amazon or the recently merged WarnerMedia-Discovery. Apple and Netflix continue to float on the periphery, but neither company has ever shown much interest in making large media acquisitions.
Reduce your ambitions. The third option is to throw in the towel for being a global streaming service. Instead, NBCUniversal and ViacomCBS could license their content to larger broadcasters and liquidate Paramount + and Peacock if they fail to gain global traction.
Bunch. Option four is similar but less drastic. ViacomCBS and NBCUniversal could begin bundling their streaming services or find new streaming partners to increase global distribution through discounted offers. The main problem with this strategy is that it limits the advantages of both companies, which will not be able to compete with larger players for superior content and breadth of programming.
The fifth option, inaction, is no longer a viable strategy. The pressure is on Roberts, NBCUniversal CEO Jeff Shell, and Redstone and ViacomCBS CEO Bob Bakish to find exciting breakthrough solutions for their businesses.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
WATCH: What the WarnerMedia-Discovery deal could mean for the streaming wars