Would NBCUniversal And WarnerMedia Be Better Off Together?

Comcast
CMCSA
and AT&T
T
should merge their NBCUniversal and WarnerMedia media divisions and create one of the largest producers of television and movies, according to a report from media research firm LightShed Management Partners.

Comcast took control of NBCUniversal from General Electric
GE
in a $16.7 billion acquisition in 2013. Five years later, the Philadelphia-based company acquired the UK pay-tv provider Sky Plc. for $39 billion.AT&T acquired WarnerMedia predecessor Time Warner for $85 billion in 2018. 

The companies may be bigger, but they aren’t necessarily better.

“Beyond scale for scale’s sake, is there a reason why Comcast and NBC Universal/Sky need to be together?” LightShed says. “Where is the evidence of real synergy? Maybe said another way, are you upset that pure-plays public companies in programming and distribution have meaningfully outperformed Comcast over the past couple of years, and is there a point where you would consider separating your assets to maximize value.”

 There would be many benefits to an NBCUniversal-Warner Media tie-up. For instance, A merged studio of NBCUniversal’s Universal Pictures
UVV
and WarnerMedia’s Warner Bros. would control 30 percent of the worldwide box office. It would also have tentpole franchises including DC Comics, Harry Potter, Fast and Furious, and Jurassic Park.

The companies also would be a force in the TV business.

A  merger of WarnerMedia’s and Universal’s TV divisions “would create a far superior TV catalog than what Disney
DIS
has even with the Fox catalog,” LightShed says. Moreover, NBC’s Peacock streaming service and WarnerMedia’s HBO Max would create a formidable competitor to Netflix
NFLX
. 

“(A deal) combines the NBC and Telemundo broadcast networks with a large group of secularly declining basic cable networks from TNT and TBS to USA and Bravo, enabling management to cull the combined network portfolio,” the report says.’’ The cost savings from this combination would fuel streaming investment.”

Universal’s Theme Park and WarnerMedia’s WB Games video games divisions would benefit from the increased amount of intellectual property that a combined company would control.  CNN and NBC News would also find many benefits to joining forces, the note says.

“There has been talk for a decade of combing CNN with another news platform to reduce overhead costs,” LightShed says. “ (It’s) important to note that CNN is the only cable network biz that has succeeded in digital/mobile, while NBC News has been aggressive in licensing content to mobile platforms such as Snapchat.”

Both companies are showing no interest in taking LightShed’s advice.

“Both AT&T and Comcast feel far too focused on their current strategies to deal with a massively disruptive and transformative merger of equals that creates a new separate entity, not to mention a sizable divesture of local TV stations,” LightShed says. “That said, it would be a huge win for investors on both sides and could create one of the only companies positioned to not just survive long-term, but to flourish as the entire media business shifts rapidly to streaming.”