Paramount is seeking a streaming partner, which could spark a wave of transactions.

• Paramount Global leaders are considering merging Paramount+, their money-losing streaming service, with other companies through discussions with various companies.
• According to sources, Warner Bros. Discovery is considering a merger between Max and Paramount+ as a joint venture.
• Streaming content has resulted in billions of dollars in losses for media companies, prompting them to explore new methods for monetization.

Paramount is in discussions with other entertainment companies about merging its Paramount+ streaming service with an existing platform. If a deal is struck, it could initiate a new era of streaming partnerships, potentially stabilizing the entire media industry.

Other media and tech company executives are in talks with Paramount Global leadership about the possibility of merging Paramount+ with another streaming service and potentially co-owning it, according to sources who requested anonymity due to the confidential nature of the discussions.

One of the companies interested in striking a deal is reportedly Paramount+, which could benefit from merging with Max to better compete with Disney+, Hulu, and ESPN for viewers and future content.

This year, Warner Bros. Discovery engaged in initial discussions about a merger with Paramount Global, but the negotiations did not progress.

Chris McCarthy, co-CEO of Paramount Global, announced at an employee town hall on June 25 that the company is considering partnering with a technology platform.

McCarthy stated at the town hall that our partner lacks our level of content, but together we will be a formidable force to increase viewership and revenue.

By offering a more diverse range of programming and reducing the reasons for customers to cancel, a merged streaming service could help Paramount Global retain customers and reduce losses for Paramount+.

Discussions about a joint venture with Warner Bros. Discovery have not included a detailed structure, but it is likely that ownership would not be split equally due to the differing financials and nature of the streaming assets, according to sources.

In 2023, Warner Bros. Discovery's direct-to-consumer business generated $103 million in annual adjusted EBITDA, a significant improvement from the $2.1 billion loss it experienced the previous year. Meanwhile, Paramount Global reported a loss of $1.67 billion in direct-to-consumer operating income before depreciation and amortization in 2023, which was narrower than its $1.8 billion loss the year before.

Max has approximately 100 million global subscribers, with 52.7 million based in the U.S. Paramount+ concluded its first quarter with 71 million subscribers.

Earlier this year, the Wall Street Journal reported that NBCUniversal had expressed interest in a joint venture with Paramount+. However, the talks did not progress and never got very far, according to sources.

"Partnering with an existing subscription streaming service like Max or Peacock would allow us to offer a vast amount of hit content across TV, film, and sports, attracting millions of viewers. Additionally, we would share in all other non-content expenses."

Representatives from Warner Bros. Discovery, NBCUniversal, and Paramount Global declined to provide comment.

Streaming 2.0

Billions of dollars in losses have been incurred by traditional media companies such as Paramount Global, Disney, NBCUniversal, and Warner Bros. Discovery since late 2019 due to the launch of their streaming services.

The consensus in the industry is that there are too many streaming services compared to the number of paying customers. Some executives predict that only four or five global services will be able to thrive, while the rest will need to be consolidated or integrated into existing platforms.

In an interview with CNBC last year, Peter Chernin, former CEO and chairman of Fox Group, stated that there could be a mix of Paramount, Peacock, and Max.

If Paramount agrees to a joint venture with either Max or Peacock, the remaining service will face increased pressure to make its own deal.

Streaming content is now being better monetized by media companies through bundles and partnerships. Disney and Warner Bros. Discovery have started licensing some of their content to rival streaming services, such as Netflix, to increase revenue from shows that aren't attracting many new subscribers to their own streaming platforms.

Comcast now offers a $15-a-month bundle that includes Peacock, Netflix, and Apple TV+ for its cable, broadband, and mobile customers.

The companies have revealed their plans to bundle their streaming services, including Disney+, Hulu, and Max, starting in the summer. Although the exact price for the package is yet to be announced, it will offer a "substantial" discount, according to a source.

Better windowing

Another popular discussion topic is streaming movies and TV shows through various services at varying price points.

Last month, Paramount Global was nearly acquired by Skydance Media, but talks fell through.

According to sources, Skydance had a plan for Paramount that involved merging Paramount+ with another streaming service to create more efficient streaming platforms.

By combining Paramount's Showtime library with another company's prestige dramas, a standalone ad-free service could be created.

An alternative ad-supported service could offer live sports and exclusive prestige originals, which could be made available on the second service after a specified time period. The services could be bundled together, similar to how Disney offers Disney+, Hulu, and ESPN+.

A representative for Skydance declined to comment.

One-app experience

The traditional media industry believes that repackaging existing content can lead to greater profitability.

Bundle or window content can confuse customers, leading to frustration rather than satisfaction with streaming services.

Media executives privately predict that Peacock, Paramount+, Max, and Disney could eventually combine their programming within a single application to reduce confusion and challenge Netflix's dominance in the subscription streaming industry, which has approximately 270 million global subscribers.

According to two executives, Disney is the most likely company to own the application due to its dominant position in the entertainment streaming industry. Any media company that contributes content to the streaming application could share in the revenue, similar to how cable economics work today.

Disney and Comcast have a strained relationship, which may make it difficult to put together a product despite their recent bundling deal with Max. The two companies are currently working to unwind their joint venture, Hulu, to give Disney full control over the service that was initially co-owned by NBCUniversal, Fox, and Disney.

Disclosure: Comcast's NBCUniversal is the parent company of CNBC.