00:00Hollywood has a new heavyweight. The deal brings Paramount and Warner Brothers Discovery together after a bidding war, multiple takeover
00:08attempts and an antitrust battle.
00:11The combined business now sits under a new parent company, Skydance.
00:16The deal is valued at $110 billion. It puts CEO David Ellison in control of one of the world's largest
00:24entertainment companies.
00:25The combined catalogue brings some of the world's biggest film and television franchises under one roof, from Harry Potter and
00:33Game of Thrones to Mission Impossible and Top Gun, alongside television networks including CBS, CNN and HBO.
00:42The deal survived months of legal challenges over its impact on competition.
00:47Twelve US states eventually settled an antitrust lawsuit that sought to block the takeover.
00:53But Skydance agreed to measures including at least 30 films a year and an extra $300 million of annual investment
01:01in American productions.
01:03We're joined by Abby Watson, who's a senior analyst at Ender's Analysis. Great to have you on the programme.
01:08So how big a moment is this for the entertainment business?
01:13I mean, it's enormous. You've just outlined the kind of scale of the two businesses that are combining two major
01:18Hollywood studios, HBO, Paramount and Max.
01:21It's creating the second largest streaming portfolio.
01:24Now, the bit that's going to be really interesting to see is obviously the balance sheet is going to be
01:28quite constrained.
01:30Well, you talk about it being constrained.
01:32Can a company carrying this much debt really afford all these films that it's promised?
01:39Well, the slate for 2027, actually, of the two combined companies does already exceed what they promised that 30 films
01:48a year.
01:48I think it's something like 34 films a year.
01:51But the interesting thing to see will be the shift in the mix.
01:54So we've seen more horror movies being released over recent years.
01:58And that is because they are fundamentally cheap to make and they tend to make quite good returns.
02:02And so I suspect that's something we'll see continuing.
02:05Now, Skydance needs to grow outside America as well.
02:09With China, for example, just one huge market making its own blockbusters.
02:14Where's the growth going to come from?
02:18Well, you're still seeing rollout in multiple territories, both Paramount and HBO.
02:24That's WBB's streamer.
02:27So recently we've seen launches, I think you believe it was in the UK, Germany and Italy and the European
02:32side, HBO.
02:33There's still a lot of geographic growth available for both of these streamers.
02:38And what's it going to mean to people like you and me who are used to watching all of this
02:43stuff, who get hooked on it, who are streaming?
02:45Is it going to make streaming more expensive?
02:47Is it going to alter the streaming universe?
02:52Possibly, although less than you might expect.
02:55Obviously, removing one player from the market does mean that the combined company will long-term have better pricing power.
03:02Although I should be very clear, at close, HBO, Pluto, Paramount, those are all continuing to be separate.
03:08And it will take some time to integrate those.
03:10But the broader trend that we've seen in the market more recently is a move back towards bundling services.
03:16So in the UK, you've got the combination of the super bundle offered by Sky that combines Netflix, Disney, HBO
03:24and a couple of others as well, I believe.
03:26Charter in the US is combining lots of services.
03:29So even though the kind of headline number that you might pay might creep up on an RRP basis,
03:36actually, there will be more bundles becoming available because what the other issue we're seeing is people turning in and
03:41out of these services.
03:43There were lots of conversations about competition before this deal was signed, sealed and delivered.
03:48Does it settle the shape of the industry, do you think, or start the next round of deals?
03:54There are some kind of clear targets that have been mooted for a little while.
03:59So NBCUniversal, which is currently part of Comcast, is due for spin-off next year.
04:03And that will include Peacock, which is currently US only.
04:06And it has quite a few attractive sporting rights.
04:09And then Lionsgate is also the kind of other company, the other studio that people have been sniffing around for
04:15a little while.
04:16So those are the next year I'd expect to see.
04:19Well, great talking to you.
04:20Abi Watson at Ender's Analysis.
04:22Thank you very much.
