Combining HBO Max and Paramount+ is Not as Easy as Some Suggest

The rumors of a Paramount Skydance bid for WBD are being overhyped, with many not understanding the difficulty in combining any two independent OTT services. I see many suggesting that combining Paramount+ and HBO Max into one service would allow for “higher ARPU” and benefit from “lower costs” from bundling the two services together. But what many media pundits don’t understand is how video tech stacks work and their complexity. It would take multiple years to combine two services into one if that were the strategy. Just look at how long it took for Disney to enable Hulu content within Disney+, a service they already owned.

Further complicating any integration are the live channels that Paramount+ and HBO Max have, along with the new TNT Sports app currently in development and expected to roll out in April, once the WBD separation happens. Paramount Global could also risk losing what makes each streaming service distinct, if combined, and it’s most likely they would simply bundle the two, not integrate them into one app and service. The company would also have to look at the overlap of consumers across both services, and a bundled discounted price means a lower APRU, not higher. It would be similar to wholesale deals that the OTT providers cut with pay TV providers, where the OTT service is paid less per subscriber each month than they get from selling to consumers directly.

While the WSJ report said a bid is imminent, other news outlets say conversations internally at Paramount Skydance have not gone that far. Irrelevant of who’s right, if Paramount Skydance made an offer for WBD, it would be far from a done deal.

WBD would have to allow time for others to make competitive bids and then review any additional offers. If they were to accept the bid by Paramount Skydance, it would need to be approved by WBD’s board and then shareholders. The deal would also need to be approved by regulators, which may not be easy, considering the current administration is not a fan of CNN. The FCC approved the Paramount and Skydance merger weeks after Paramount agreed to pay $16 million to settle a lawsuit Trump had filed against the company, which many believe is no coincidence.

It has previously been reported that WBD’s CEO has been discussing offers for CNN and other parts of the debt-laden WBD business, which currently has $35.6 billion in debt. Some pieces of WBD’s business could also be divested even before a bid from Paramount Skydance or anyone else is made, if an offer is indeed coming. Multiple media reports, dating back more than a year, have detailed David Ellison’s interest in WBD as a way to beef up Paramount Skydance’s film slate, so his interest in WBD is not new. What might look good on paper and be easy to suggest is unlikely to be the reality if a deal were to take place.