Will WBD Buy Paramount, Will Amazon Bail Out Diamond Sports?

1. Will WBD Buy Paramount?

The rumor of the week has Warner Brothers Discovery buying Paramount. While the notion of two legacy media companies combining forces may seem like “more of the same” it should not be a surprise to anyone that the industry is in dire need of contraction, that there are too many players all vying for the same consumers, programming and dollars.

As Evan Shapiro pointed out in our Thought Leaders Circle 2024 Predictions piece on Monday, mergers will not be limited to content owners either— device manufacturers, measurement companies, gaming companies and social media companies are all in play too.

But back to the issue at hand: given the direction WBD seems to be heading in with Max, buying Paramount is actually a smart move, one that leaves them well positioned for now and, if things work out as planned, for the near future when the combined company will itself be an acquisition target.

Allow me to explain.

Why It Matters

WBD seems to be positioning itself as a mini-MVPD, a place where you can get a full array of content options, neatly bucketed.

This is somewhat revolutionary for the streaming space as most players tend to follow Netflix’s lead and let The Algorithm connect viewers with the programming they want to watch.

This can be useful but it also means that large swaths of content (indie movies in the case of Netflix) are often hidden from viewers while removing the very important concept of serendipity wherein viewers discover shows and movies they did not know they wanted to see.

WBD’s buckets run counter to that notion, but they also seem to fill many consumers’ needs. 

At present, Max offers news (CNN), sports (Bleacher Report/TNT), and entertainment, with the latter broken down further into buckets like HBO, Discovery, HGTV, The Food Network and Max.

Point being it starts to feel a lot like a traditional pay TV package where you can choose among a wide range of channel offerings.

Buckets and Channels being relatively indistinguishable to consumers.

The other benefit to Max’s system is that it gives consumers a sense of just how much content Max has, versus, say, Netflix, where The Algorithm only shows what is on the surface.

That said, there are certainly pros to Netflix’s system: Suits, which languished on Max for years, managed to become a breakout Rerun Hit on Netflix. Though one can counter that this happened prior to Max’s decision to create buckets when the service was also relying on algorithms.

So there’s that.

Moving on to Paramount however, an acquisition would provide Max with a passel of very popular buckets—CBS, Showtime, BET, Nickelodeon, Comedy Central, Paramount films. 

What that does is it makes Max even more indispensable and even less reliant on having a string of Succession-like shows that draw in new subscribers. Because while Succession wins a lot of awards and bewitches the New York Times, it does not draw in a whole lot of new viewers. So better to “obtain and retain” using the “something for everyone” and “massive content library” approach.

Which is exactly where Paramount comes in.

Add in all those Paramount buckets to Max’s existing buckets and you have something that looks even more like an old school pay TV package, only with all sorts of flashy extras like no ads or fewer, shorter ad blocks, everything available on-demand and on any device.

The key benefit of this is it helps make Max indispensable, one of the streaming apps you never think about unsubscribing from. Right now those apps are mostly Netflix and Disney, but the merger gives Max the chance to become indispensable to a good swath of the viewing public. And when you’re doubling down on advertising, the less churn there is, the better.

Paramount also has Pluto TV, a very popular service in its own right. That would give WBD, which has stated that it plans to launch a FAST service of its own, one less thing to worry about.

Pluto TV also gives Max’s older library shows a monetizable home, while making the service itself more attractive thanks to the addition of much more exclusive or semi-exclusive content.

In addition, Max could use Pluto TV to create a flywheel effect, running older seasons of Max’s original series as a way to drive subscriptions. 

The deal is, of course, not without its downsides.

There would be some regulatory concerns, but given that Max’s linear properties are all cable networks, these issues will be of far less concern than if, say, Comcast (NBC) or Disney (ABC) were trying to buy Paramount (CBS).

There’s also the linear/streaming tightrope thing.

Legacy media companies need to convince MVPDs to keep on paying high carriage and retrans fees while simultaneously shifting their audiences and advertisers to streaming, all while keeping everyone happy.

No mean feat that.

What You Need To Do About It

If you are WBD, Paramount has been making some real innovations in the way it handles its streaming advertising product. That’s something to both value and to learn from if the deal goes through.

Paramount+ has also rolled out linear channels for its library shows, something WBD has played with on its Discovery+ app. We remain convinced that linear channels are a surefire way for subscription streaming services to boost viewership on their ad-supported library content. Consumers, especially older consumers who have fond memories of many of the library shows from when they were new, like linear channels and so it’s a win-win situation all around.

If you are the FCC and/or FTC, the only way these legacy media companies will survive is if they merge. So don’t make this harder than it needs to be.

2. Will Amazon Bail Out Diamond Sports?

There’s a second rumor going around this week that Amazon may pitch in to help bail out Diamond Sports.

Diamond, if you recall, is the company Sinclair spun out in partnership with Ballys to take over their 19 RSNs (regional sports networks) and create streaming apps for them while also striking cable and vMVPD deals.

That hasn’t gone so well—Diamond has filed for bankruptcy amidst a sea of over the top (pun intended) drama.

The news that Amazon is looking to bail them out only adds a new wrinkle to the ongoing saga.

Though it does make hella sense for Amazon.

Why It Matters

Amazon has already had great success with streaming sports—its Thursday Night Football NFL Property, 

It’s not the viewership numbers as much as the ad dollars. Amazon knows pretty much everything you’ve bought for the past decade and can extrapolate much about your other purchases as a result.

If, for instance, you have bought a cover for a Weber Series-A grill from Amazon and some new barbecue tools, then Amazon can safely assume you own a Weber Series-A grill and include you in ads aimed at barbecue enthusiasts.

That makes Amazon’s inventory that much more valuable to advertisers, especially now that they are adding in ways to make those ads shoppable.

It would also greatly boost the local inventory available to Amazon’s new self-serve platform which is aimed at small and medium-sized businesses, many of which are local in nature.

And, much as I don’t wish this on sports fans, it would also boost the amount of very targetable inventory for political ads next year, an area where we are going to see a massive amount of spending.

There are some red flags however.

There are reports that the NBA has a deal in place to take back rights to all of its teams from Diamond at the end of the season. Whether Amazon’s intervention will then make that deal moot is anyone’s guess, but the league does have a vested interest in making sure its teams are taken care of, something it was rightly worried Diamond might not be able to do.

In a similar vein, if Amazon gets streaming rights to the Diamond RSN, the NBA may decide they have a big enough piece of the pie and give the bigger league-wide rights deals that are up later this year to someone else. 

Or they may decide the synergy is a good thing and give even more to Amazon.

Everything is just too tentative to tell.

What You Need To Do About It

If you are Amazon, this is a very smart move. You are launching your ad-supported plan sometime in 2024 and if viewers are mostly watching Prime for the (inevitably ad supported) sports, they will not be tempted to remain ad-free.

Not to mention all those jerseys, caps and mugs you can slip into viewers’ home pages.

If you are Diamond, this is a wonderful development as it should let you avoid bankruptcy. Full stop. 

If you are a fan, this is a great deal as it lets you avoid having to pay for a full pay-TV subscription just to watch your favorite team. And chances are you already have an Amazon subscription, so you’re really saving big.