A Difficult Time for Media Companies
The media industry is facing significant challenges as it navigates through a tough period. Comcast, in particular, is grappling with weak earnings growth due to declining ad revenues and cord-cutting. Additionally, its streaming service, Peacock, experienced a loss of $3 billion this year. Disney, too, is struggling with its streaming service, Disney+, which has incurred losses amounting to $11.4 billion since its inception in 2019.
Discovery’s Efforts and Existing Challenges
Amidst these difficulties, Discovery has been making commendable progress in combining WarnerMedia and Discovery, streamlining operations, and reducing merger debt. However, it still faces challenges, including $40 billion in debt and a streaming service that barely breaks even. Despite these hurdles, Discovery’s CEO, David Zaslav, has managed to generate $5 billion in free cash flow for potential acquisitions.
Paramount’s Troubles
Paramount Studios is another media company struggling in the current market conditions. The company’s streaming service is projected to lose close to $2 billion this year, while its programming has been described as a “melting ice cube.” Sunday football ratings, even with CBS holding NFL rights, are challenging due to cord-cutting, and the studio itself is losing money. Paramount’s debt currently stands at $15 billion, making it difficult to generate cash flow for bondholders.
Zaslav’s Strategy and Skepticism
David Zaslav, known for his dealmaking skills, is focused on integrating businesses and creating value. As a former executive of NBCUniversal, Zaslav honed his expertise in this area. His interest in Paramount is driven by its studio and library assets, while Paramount is eager to sell. However, analysts like LightShed’s Rich Greenfield remain skeptical due to the lack of a concrete deal and concerns over the considerable cost of acquiring Paramount.
The Endgame and Uncertainties
While Zaslav is considering the acquisition of Paramount, his ultimate goal appears to be partnering with Big Tech. He recognizes the growing influence of tech giants and their role as distribution platforms for programming. However, Zaslav faces challenges in securing Paramount and hopes for a change in the political landscape, as deal-blocking tendencies from the current administration could hinder Big Tech’s growth in the media sector. Overall, the media industry awaits its moment of truth, while Zaslav seeks to delay the market’s response through strategic moves like a potential Paramount acquisition.