Why are media mergers so tough to pull off?
Monday marked the two-year anniversary of a $43 billion corporate marriage — that between media giants WarnerMedia and Discovery, resulting in Warner Bros. Discovery.
It’s been a tough two years for the entertainment conglomerate. Its stock price has dropped by basically two–thirds, and its streaming service Max is well behind Netflix in subscriptions. Corporate marriages are hard. Corporate media marriages are often exceptionally hard.
One thing about Warner: They never give up trying to find the right partner.
AOL merged with the company, called Time Warner back then, in 2000. You might remember that as the largest merger in U.S. history and a $182 billion disaster.
Then, AT&T acquired Warner in 2018, and after a four-year relationship, decided to split.
“I think the reason [Warner is] always in the middle of these mergers is because they have absolutely fantastic assets,” said David Offenberg, a professor of entertainment finance at Loyola Marymount University.
Current Warner properties like “Harry Potter,” HBO and “Batman” could be very attractive to would-be suitors. But there’s a hiccup. “Getting the money from the great stuff that they own has just been the problem,” Offenberg said.
Merged media companies typically have elaborate plans to monetize their collective content libraries, then social media or streaming or some other tech breakthrough arrives.
“You could go to sleep in the steel industry and you know what? Things are kind of the same 20 years later. But you take a nap in the media business? The industry is completely transformed,” said Neal Zuckerman, a managing director at Boston Consulting Group focused on media.
That makes a successful media merger in the internet era tough — but not impossible.
“Let’s not forget that Marvel was a standalone comic book company, and Disney said, ‘Hey, we’re really good at commercializing franchises,'” said Adam Haller, a merger integration consultant at Bain & Co.
For its part, Warner Bros. Discovery is the subject of merger rumors yet again, although it’s bogged down by billions in debt incurred in previous acquisitions.
But who doesn’t have baggage from past relationships?
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