In what will we notice the purchase of Warner by Paramount?

BarcelonaThe United States' communication landscape continues to suffer blows related to Donald Trump's determination to reconfigure this ecosystem in his favor. Netflix made an offer to buy a substantial part of Warner Bros. Discovery, but it will ultimately be Paramount that manages to acquire the company, and what's more, it will do so entirely. In this article, we analyze the consequences this move among giants may have.

A New Aspirant to the Streaming Podium

The video-on-demand business is beginning to make it clear that there is room for a limited number of major players. The giants of the sector have incurred significant expenses to acquire attractive content that allows them a good position, but these fat cows are not sustainable for everyone, and economic logic dictates that only a few dominant global services can aspire to make the numbers work.

At present, YouTube and Netflix are clearly the gold and silver of this competition. The former lives mainly off advertising (it bills around 40 billion dollars annually in ads and earns about 20 billion more thanks to subscriptions, including its sports channels). The latter, on the other hand, is fueled mainly by its 325 million subscribers – more than any other platform – and only earns about 1.5 billion dollars in advertising, which represents 3% of the 45.2 billion it turns over in total.

There are no prospects for changes in these two positions in the short term. In contrast, the fight for bronze is more intense. Among the aspirants are Disney+ and Amazon Prime Video, with around 200 million subscribers, which is precisely what the new company resulting from the merger is estimated to have, once the 132 million that Warner Bros. Discovery has – mainly from HBO Max – and the 78.9 million from Paramount+ are added. The advantage for the new company is that they do not overlap much. The consulting firm Antenna states that only 21% of Paramount+ subscribers also have HBO Max, so the net sum, if the two platforms are hybridized, will not lose many users (and it is assumed that it will be more competitive and therefore attract new audiences).

When the merger, both of companies and platforms, is completed, it will easily exceed 200 million subscribers, allowing it to aspire to third place in the "streaming wars". However, in terms of viewership – the other major metric – the prospects are not so good. The new combined platform aims for a 2.8% market share, still well below Disney's 4.9% (if the sister platforms Hulu and the sports channel ESPN+ are added) and Prime Video's 4.1%. Much higher are YouTube's 12.5% and Netflix's 8.8%.

This will allow the new colossus to leave Peacock or Apple TV behind, which are clearly more minor and will be relegated to a tail wagon that casts shadows on their purpose. Peacock is the on-demand service of NBC, one of the three major free-to-air television networks in the US, and has not achieved significant international development. Apple TV is given away for a few months when purchasing an Apple device, so it functions more as a brand image and purchase incentive than as a service aspiring to independence and economic sustainability. Several analysts agree in pointing out that some of the even smaller services will eventually find alliances or mergers to maintain a relevant position.

Information Plurality, Under the Microscope

Paramount's deal is for all of Warner Bros. Discovery, and this includes the television channels that Netflix rejected. In this chapter, all eyes are on CNN. Considered one of the informational strongholds of the Democrats, the first concerns have begun to arise about whether the merger will lead to a radical change in its editorial line. After all, Paramount Skydance owns the CBS News channel, which in recent months has been involved in several controversies, all in favor of Trump. The appointment of Bari Weiss as director – someone with no television experience and an openly "anti-woke" agenda – has resulted in resignations, halted reports, and declining audiences, which have caused a 20% drop in viewership for the main programs of the house.

With this background, nerves at CNN have begun to show. In the news from major American media outlets, anonymous sources from the network appeared saying the atmosphere was "horrible" or "depressing." The CEO of the network, Mark Thompson, sent an internal memo urging not to jump to conclusions, but the possibility that Weiss may have an important role at CNN as well causes unease in the newsroom. David Ellison, CEO of Paramount, has assured that "editorial independence will be absolutely maintained," both at CNN and CBS. Although he dodged the question about a possible merger, an article on the CNN website suggested that executives from the acquiring company are already exploring possible synergies between the two news brands.

Netflix, a Winning Loser

Meanwhile, things don't seem to be going badly for Netflix, despite having lost an operation over which it had the first initiative. The day after the Paramount agreement was finalized, its shares grew by 14%. This was the stock market's way of thanking the company for not getting involved in an operation that had profits in sight, but also significant risks. Furthermore, that day the company received an unexpected windfall: the 2.8 billion dollars that Paramount paid as a penalty for breaking the preliminary agreement with Netflix.

Both Paramount and Warner have problems consolidating their business proposal in the streaming world, which is not the case for Netflix, because its model is simple and clean. Moreover, they carry a considerable amount of debt, the management of which appears more than complicated. Netflix aspired to acquire some of Warner's popular franchises and content brands, a century-old film studio, but it did not want to do so at any price. Although the platform is haunted by doubt about whether it has enough creative power, viewership figures suggest that it retains more ability to engage viewers than anyone else. And, in the end, it has been a company that has bet more on organic growth than on ambitious acquisitions. The platform will therefore continue its fight alone. There will be more original production on Netflix, but also more acquisitions of series and films that – thanks to its work with data and recommendations – perform better here than on their original services.