Here Are the Next Media Mergers That Make the Most Sense

• ViacomCBS and NBCUniversal are both likely to decide they are too small in their current form to compete against Disney, Netflix and Amazon in the streaming wars.
• An NBCUniversal merger with Lionsgate has industrial logic.
• ViacomCBS may want to wait for WarnerMedia-Discovery to close and then seek a merger with the combined company.

AT&T's decision to merge WarnerMedia with Discovery and Amazon's $8.45 billion acquisition of MGM Studios has kicked off another round of media consolidation.

The last significant set of mergers brought Discovery and Scripps together, AT&T and Time Warner, Comcast and Sky, Viacom and CBS, and Disney with most of Fox.

Given all of those deals, there are fewer companies remaining to find dance partners. But there's also added pressure on companies like NBCUniversal and ViacomCBS, who have global streaming video aspirations, to add more content.

Here are a few combinations of companies that make strategic sense.

NBCUniversal and Lionsgate

Buying Lionsgate would help Comcast's NBCUniversal on two different fronts. First, it would add more content to Peacock, NBCUniversal's subscription video service. Lionsgate owns shows including "Mad Men," "Orange is the New Black," "Nashville" and "Zoey's Extraordinary Playlist." Lionsgate currently licenses those shows to a grab bag of streaming services.

Second, Lionsgate owns premium network Starz, which would fit seamlessly with NBCUniversal's offerings. NBCUniversal doesn't have a premium network, unlike competitors WarnerMedia (HBO) and ViacomCBS (Showtime).

On the streaming front, a Starz-Peacock combination -- either together as one service or separately as a bundled offering -- could expand NBCUniversal's global aspirations. Starz is on track to have 60 million global subscribers by 2025, Chief Executive John Feltheimer said this week. Starz is already available in 58 different countries, which would give Peacock a head start in its expansion aspirations.

And Lionsgate wouldn't cost much, with a market capitalization of just $3.8 billion (an an enterprise value of about $6.4 billion). If Comcast is going to keep NBCUniversal -- bucking AT&T's decision to give up on vertical integration -- buying Lionsgate would be a sensible move to stay competitive in the streaming wars without breaking the bank.

WarnerMedia-Discovery and ViacomCBS

There's already speculation about a potential future merger between the newly created WarnerMedia-Discovery entity (assuming the deal closes) and NBCUniversal. Discovery's controlling shareholder John Malone said on CNBC how the combined company could be open to a future merger with NBCUniversal if regulatory forces would allow it.

But the divestments that might have to take place could be too complicated and tax-inefficient for that combination to occur. Regulators might not allow CNN and MSNBC to be housed under one corporate roof. Combining Comcast's Universal and WarnerMedia's Warner Bros. -- the No. 2 and No. 3 largest film studios by box office revenue in 2019 and 2018, the last full years of theatrical releases -- may also be a non-starter.

The more logical combination would be WarnerMedia-Discovery and ViacomCBS.

Shari Redstone's company has a broadcast network -- CBS. WarnerMedia-Discovery doesn't, so that's a fit. (The combination of CBS and NBC under one roof would be one major roadblock to a ViacomCBS-NBCUniversal merger.)

Unlike NBCUniversal, ViacomCBS doesn't have a large cable news network. That makes keeping CNN more viable.

While ViacomCBS also owns a movie studio, Paramount has been a much smaller box office presence than Universal in recent years. Among global film studios, Paramount was sixth in box office revenue in both 2018 and 2019. Putting together Paramount and Warner Bros. would be an easier sell for antitrust concerns.

The biggest complication would be if Redstone is willing to give up or dilute her controlling ViacomCBS shares. That's what Malone did to push Discovery and WarnerMedia together, so there's now a template.

Disney and AMC Networks

This is the hardest sell. Disney doesn't really need AMC Networks. It's doing perfectly fine with the content it has.

But with Disney-owned Hulu licensing so much of its content, it's vulnerable to losing some of its hit shows. MGM, for example, makes "The Handmaid's Tale." Now that Amazon has acquired MGM, it's unclear if the series will remain on Hulu once that deal closes.

The owner of "The Walking Dead," IFC Films, and Sundance Now could provide an adult-themed content boost to Hulu. That would balance out the robust kids' offering on Disney+ and sports on ESPN+. AMC has forecast it will have at least 9 million streaming subscribers by the end of 2021 and 25 million by the end of 2025. That's a far cry from Hulu's current 41.6 million or Disney+'s 103.6 million, but it's evidence that there's at least some audience for the programming.

And while cable is slowly dying, it's not dead yet, with about 85 million U.S. households still subscribing to some form of bundled linear TV.

Disney's ESPN remains the lifeblood of the traditional pay-TV bundle. Bundling AMC Networks' cable networks with ESPN would protect affiliate fees, as pay-TV providers have always been loathe to drop ESPN.

The Dolan Family controls AMC Networks. The Dolans have likely known for years that AMC Networks is subscale and should combine with a bigger media fish. If the Dolans don't want to sell, they won't. But AMC Networks is relatively tiny at $2.2 billion in market valuation and about $4 billion in enterprise value. Disney could easily buy the company in cash.

However, Disney's previous acquisitions -- Pixar, Marvel, Lucas Films -- have been for intellectual property. Does AMC Networks own enough valuable IP to make a deal worth it for shareholders? And is that IP family-friendly enough to mesh with the company's theme park business?

That may be why a Disney-AMC deal hasn't already happened.

Disclosure: NBCUniversal is the parent company of CNBC.

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