Paramount is looking for a streaming partner. Warner Bros. Discover is interested

Paramount Global is holding talks with other entertainment companies about merging its Paramount+ streaming service with an existing platform. If it reaches a deal, it could kick off a new wave of streaming partnerships that could put the entire media industry on a more solid footing.

Paramount Global leadership is in active discussions with other media and technology company executives to determine whether a structure makes sense for both sides where Paramount+ could be merged with another streaming entity and potentially co-owned, according to people familiar with the matter, who asked not to be identified because the discussions are private.

One of the companies that has expressed its desire to reach an agreement is Warner Bros. Discoveryaccording to people familiar with the matter. The combination of Max and Paramount+ could strengthen both services by allowing them to better compete with Netflix and From Disney suite of platforms (Disney+, Hulu and ESPN) to attract audiences and obtain future content.

Warner Bros. Discovery held preliminary merger talks for a deal for all of Paramount Global earlier this year, but the talks did not move forward.

Paramount Global is also considering partnering with a technology platform, company co-chief executive Chris McCarthy said at an employee meeting on June 25.

“What they don't have is our scale of content, and together we will create a very powerful combination to drive more minutes and higher revenue,” McCarthy said of a potential technology partner at the town hall, according to a transcript of the event obtained by CNBC.

A merged streaming service would mitigate customer churn by offering customers more diverse programming and fewer reasons to cancel each month, and could move Paramount+’s losses off Paramount Global’s balance sheet by giving it new ownership.

While a structure for a hypothetical joint venture with Warner Bros. Discovery has not been discussed in detail, ownership likely would not be a 50-50 split given the existing nature of the streaming assets and their finances, according to people familiar with the discussions.

Warner Bros. Discovery’s direct-to-consumer business generated $103 million in annual adjusted EBITDA in 2023, after losing $2.1 billion the year before. Paramount Global reported a loss of $1.67 billion in direct-to-consumer operating income before depreciation and amortization in 2023, narrower than the $1.8 billion loss the year before.

Max has about 100 million subscribers worldwide, with 52.7 million of those based in the U.S. Paramount+ closed its first quarter with 71 million subscribers.

from Comcast NBCUniversal has also expressed interest in a joint venture with Paramount+, as first reported by The Wall Street Journal earlier this year. Talks did not advance and never got very far, according to people familiar with the matter.

“The sheer amount of blockbuster content we could offer together would be huge across TV, film and sports, and would attract millions of viewers,” McCarthy said during the meeting, referring to a potential partnership with an existing subscription streaming service like Max or Peacock. “Plus, we would share all other non-content expenses.”

Spokespeople for Warner Bros. Discovery, NBCUniversal and Paramount Global declined to comment.

Since late 2019, traditional media companies such as Paramount Global, Disney, NBCUniversal and Warner Bros. Discovery have launched streaming services that have suffered losses valued at billions of dollars.

There has long been an industry consensus that there are too many streaming services relative to the total number of paying customers. Many executives have speculated that only four or five global services are likely to survive and thrive. The rest would need to consolidate or integrate into existing platforms.

“There could be some combination of Paramount, Peacock and Max,” Peter Chernin, former CEO and chairman of Fox Group, said in an interview with CNBC last year.

If Paramount does reach an agreement on a joint venture with Max or Peacock, there will be additional pressure on the service left out to make its own deal.

Media companies are now focused on improving the monetization of streaming content through bundles and partnerships. Disney and Warner Bros. Discovery have recently shown themselves more willing to license some of their content to rival streaming services, such as Netflix, to better monetize shows that aren’t adding many new subscribers to their streaming services.

Comcast recently introduced a bundle of Peacock, Netflix and Apple TV+ for its cable, broadband and mobile customers for $15 a month.

Disney and Warner Bros. Discovery announced plans to bundle their streaming services starting this summer. While the companies have not yet announced pricing for the package, which will include Disney+, Hulu and Max, the discount will be “significant,” according to one of the people familiar with the matter.

Another hot topic of debate at the moment revolves around the possibility of watching movies and TV series through different streaming services at different prices.

This idea was something considered by Skydance Media, which nearly acquired Paramount Global before talks fell through last month.

Skydance’s plan for Paramount included merging Paramount+ with another streaming provider to create new streaming services that would better rationalize assets, according to people familiar with the matter.

For example, Paramount's Showtime library could be combined with another company's prestige dramas to create a standalone ad-free service.

A separate ad-supported service could then include live sports and windowed prestige originals, which could appear on the second service after a set time. The services could be bundled together, as Disney does with Disney+, Hulu and ESPN+.

A representative for Skydance declined to comment.

There is a widespread and shared feeling among traditional media leaders that better packaging of existing content can be more lucrative for the entire industry.

The downside to increased content bundling or distribution is customer confusion. The rise of bundled offerings across streaming services can easily lead to frustration rather than customer satisfaction.

Several media executives have said privately that they hope Peacock, Paramount+, Max and Disney can eventually unite their programming within one app to ease confusion and compete with Netflix, which dominates the subscription streaming industry with about 270 million global subscribers.

Two executives said Disney would be the most likely company to own the app, given its relative dominant position in the entertainment streaming industry. Any media company that contributed content to the streaming app would be able to share in the revenue, similar to how cable economics work today, they added.

However, rivalries and tensions between companies can make it difficult to create such a product. While Max and Disney have reached a joint sales agreement, Comcast and Disney have long had a tense relationship. Currently, the two parties are trying to dismantle a joint venture (Hulu) to give Disney full control over the service that was initially jointly owned by NBCUniversal, Fox and Disney.

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