‘Hard to imagine’ no price hikes after Paramount Warner Bros mega merger
Streaming customers are likely to face further price rises after Paramount and Warner Bros Discovery complete their $111bn (£82bn) merger on Tuesday, analysts have warned.
The Hollywood giants will combine under a new parent company called Skydance, bringing Paramount+, HBO Max and some of the world’s most valuable film and television franchises under one roof.
The deal is expected to close on Tuesday 6 October after clearing its final legal hurdles last week.
But Mike Proulx, vice president and research director at Forrester, warned the huge debt used to finance the takeover could ultimately feed through to subscribers.
“Every streaming service has been on a relentless cycle of jacking up their prices for profitability”, he said.
“And because the Paramount-WBD deal was financed with a massive amount of debt, it’s hard to imagine that streaming price hikes aren’t in Skydance’s future”.
The enlarged company will bring together a formidable catalogue spanning Harry Potter, Game of Thrones, DC, Mission: Impossible and Top Gun, alongside television networks including CBS and CNN.
It will also put Paramount+ and HBO Max under the same corporate roof as Hollywood increasingly turns to consolidation in its battle for scale against Netflix, Disney and the tech giants.
Skydance has recently softened plans to combine its streaming operations into a single service, according to Proulx, with a Paramount+ and HBO Max bundle now another possibility. That could preserve some choice for subscribers but he said it was “far-fetched to think it’ll prevent downstream price hikes”.
Streaming takes centre stage
The merger survived months of legal challenges over its impact on competition, with 12 US states eventually settling an antitrust lawsuit that sought to block the deal.
Under the settlement, Skydance agreed to measures including releasing at least 30 films a year and investing an additional $300m annually in US productions.
But Proulx argued the biggest long-term competition question lies not in cinemas or traditional television, but streaming.
“The fight over this M&A deal happened through the rearview mirror based on legacy markets that consumers are leaving behind”, he said. “It’s the streaming market where the lasting impact of this mega merger will actually play out”.
Skydance also unveiled its new leadership structure ahead of Tuesday’s closing, with David Ellison remaining chairman and chief executive alongside new co-chief executive Ynon Kreiz, who previously ran Barbie maker Mattel.
Kreiz will oversee the day-to-day running and integration of the two companies, while Ellison focuses on strategy, creative direction and technology.
HBO boss Casey Bloys has meanwhile been named co-chair and chief content officer of Skydance’s direct-to-consumer division, giving him oversight of original programming for both HBO Max and Paramount+.
Proulx said putting HBO’s leadership at the heart of the combined streaming business should help protect the premium brand, but warned the economics of the deal could still filter through to what viewers watch.
“While that bodes well for the HBO brand, make no mistake, Bloys will be pressured to find and deliver cost efficiencies that could affect content quality”.
The enlarged company is taking on a huge debt burden while targeting billions of dollars of savings from combining the two media groups.