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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The battle for Paramount Global is entertainment worthy of Hollywood. Controlling shareholder Shari Redstone favours a deal with David Ellison’s Skydance over joint interest from Sony and Apollo, pitting her against minority shareholders and prompting the departure of the CEO. But it also shows the climax is approaching in a longer-running industry drama. The likely sale of Paramount marks it out as the first big casualty of the streaming wars. It may not be the last.
When companies followed Netflix into streaming, market entry was straightforward. Technology companies like Apple leveraged their existing customer bases to lure subscribers, while venerated studios such as Warner Brothers built platforms for their intellectual property. All players used their existing profitable business lines — specifically cable TV for the media companies — and the favourable borrowing environment to finance flashy films and series.
The road to profitability, however, has been more winding. Initial streaming losses were seen as an investment in market share. But streaming has also killed media companies’ golden goose, as consumers have “cut the cord” of cable TV in favour of subscriptions. In a rush to gain market share, Paramount, Warner Bros, and NBCUniversal have poured billions into streaming. With interest rates higher, subscriber growth slowing, and streaming losses mounting, Wall Street has now turned up the pressure on Hollywood.
Despite its ownership of marquee franchises such as The Godfather and Mission Impossible — which makes its studio attractive to buyers — Paramount has been weakened by the decline of cable and the billions it has invested into its late entrant into the streaming wars, Paramount+. The group’s debt rating was cut to junk by S&P in March. The fate of the subscale Paramount+ in any takeover is unclear. But other legacy media giants that have spent big on streaming platforms without turning profits may also now have to consider merging or selling them.
Consolidation has long been seen as inevitable in an crowded streaming market, but has its downsides. Hollywood is famous for its monopolistic tendencies, and having fewer players could further squeeze actors and writers, who went on strike last summer. Reorganisation may hasten the shrinking of the industry, pushing more people out of Tinseltown. It also threatens to lead to narrower choice and less abundant top-quality content for consumers, who have already seen streaming prices rise.
For now, according to analysts, the smaller streaming players are trying to emulate the most successful, Netflix, by introducing new advertising tiers and by bulking up their content libraries. But with financial conditions drying up, spending across streaming has slowed from its Covid heyday. Streamers have started commissioning fewer titles and ordering a higher proportion of cheaper unscripted series, including reality shows and sports documentaries.
They are also relying on existing IP to fill their content coffers, as buying popular franchises bears less financial risk than new commissions. Many critics have long lamented film studios’ overreliance on franchises. But as shown by Disney’s acquisition of Fox, Amazon’s purchase of MGM, and now the questions over what happens to Paramount+, the future of streaming may also be sequels and spin-offs.
This highlights a new evolution in the streaming wars: streamers seem set to start looking more like the cable TV they displaced. Viewers were initially drawn to the likes of Netflix by the promise of advertisement-free original content. But the era of “Peak TV”, for now at least, may be over.
