What the Paramount-Warner Bros. Merger Reveals About the Future of Media (Guest Column)

Paramount's purchase of Warner Bros. Discovery Inc. to form Skydance Corp., which will take the combined company to second place in Nielsen's share of U.S. TV viewers and bring together two of Hollywood's biggest studios, has reignited talk of media mergers. But the bigger story is what the merger highlights about the pressures that are changing the media industry […]

"You can't fixate your way out of disruption," writes Accenture's John Peters.

Paramount's purchase of Skydance from Warner Bros. Discovery to form Skydance, which moves the combined company to second place in Nielsen's share of US TV viewers and brings together two major Hollywood studios, has reignited talk of media mergers. But the bigger story is what the merger highlights about the pressures that are changing the media industry and the race to recreate a market where audiences are more fragmented, competition for attention is intensifying, and technology is changing how content is created, distributed and monetized. RELATED STORIES 'Blood and Bone Kids' Author Tommy Adeyemi Quietly Cancels New York Comic Con Panel

The most interesting thing about this acquisition isn't just the merger itself. This is what companies do after merging with scale. Combining two companies can create scale, but scale alone does not automatically create relevance—much less long-term survival. Media companies are now forced to take a closer look at their portfolios and determine which assets, brands and capabilities will drive future growth. The real test is whether that scale can be translated into stronger audience desire, better experiences and new sources of growth. Popular in Variety

Hollywood may be consolidating, but attention isn't.

There may be fewer traditional media companies today, but there are more competitors for consumers' attention.

Media companies are after the same things: consumer attention, subscription dollars, advertising revenue, talent, and data and technology capabilities. And they don't just compete with each other. They're competing with some of the world's biggest tech platforms — and the armies of creators that enable them, not to mention the growing number of competitors vying for attention, such as video games, music, and even sports betting and AI chatbots.

While box office or TV ratings used to be the competitive unit, it has become clear that minutes are now the competitive unit. Every platform bids for the next minute of someone's attention. Kinship war is going on.

So what does consolidation mean for how media companies think about IP? The instinct after stabilization is to consider fewer titles and fewer bets. But technology and artificial intelligence are simultaneously pushing the content production economy in the opposite direction.

A merger between Paramount and Warner Bros. could ultimately lead to more content, not less. But this requires a broader view of content, a view that goes beyond traditional film and television programs.

It's long past time to stop thinking of content as just "shows" and "movies" and acknowledge that today's franchises have ongoing relationships with their fans. Consumers are increasingly moving between long videos, short videos, gaming, social communities, goods and live experiences. Recent Accenture research found that 55 percent of consumers want social features in streaming services, while 58 percent say user-generated video can be just as entertaining as traditional media.

The next media battle won't be over who has the biggest content library. It's about who created the deepest fan relationship. It's as applicable in film and television studios as it is in the newsroom, on broadcast trucks outside of a sporting event, on music labels and platforms, social video sites, sports betting apps and AI chatbots. In the dependency war, the future of content may be fewer individual titles, but more seamless experiences around important titles and brands.

Streaming is no longer an industry organizing idea. This battle has extended to every channel competing for consumer attention.

Audience fragmentation is the new reality and consumer attention is fragmented. Accenture research shows that the number of media types that consumers choose most in 10 different entertainment situations will increase from just two in 2022 to six in 2025.

According to Nielsen, streaming is still the leading source of TV content, as it now accounts for nearly half of TV usage. However, while streaming was once the destination, it is now just a stop along the way.

A merger can make you bigger overnight, but it can't reinvent you overnight. Accenture research shows the industry faces a major challenge: More than 9 out of 10 media executives expect GenAI and new entrants to significantly change the industry within just two years. Meanwhile, 88% of media executives cite rigid technology stacks as a major barrier to transformation, with legacy media companies spending roughly 6% of revenue on IT compared to 9-10% for media businesses at diversified tech companies.

M&A can create scale, but scale is only valuable when it capitalizes on reinvention. The big question is, will companies use this financial flexibility to invest in AI, technology, advertising, personalization, new experiences, and new business model innovations?

The real benefit from integration is not cost reduction. It is the ability to create the next generation of media businesses. So the strategic question is not, "Are we big enough?" It's "Are we different enough and can we change fast enough?"

M&A is likely to remain an important part of the industry's strategic toolkit, although the nature of deals may evolve.

There is an obvious economic rationale for additional consolidation where firms can achieve scale, eliminate duplication, or enhance distribution. However, in an affinity war with audiences disconnected from legacy media and streaming offerings, scale without reinvention will unfortunately only increase the size of the lifeboat that is helplessly heading into the waterfall of the future.

With the Skydance transaction heading towards an increasingly inevitable closure, everyone is naturally wondering which major media company will merge next. However, the industry may be asking the wrong M&A question. The key thing to consider is what capabilities media companies don't have.

In fact, Accenture research found that in 80% of deals that outperformed the sector average, dealmakers had a strong emphasis on technology transformation and acquisition of technology capabilities. Even the most capable buyers get better with each transaction.

The strongest deals add what the company lacks. Therefore, some of the most significant deals may be smaller acquisitions that bring new skills or technologies to media companies. In the war for affiliation, legacy brands like Golf Channel and The New York Times are showing what growth and diversification is possible with targeted segment-specific acquisition strategies.

The rallying cry in corporate development offices across Hollywood should be to stop buying more of yesterday's media business. Instead, buy the skills you need for tomorrow. The future of this industry depends on how well media companies transform their portfolios and capabilities into better products, stronger relationships with audiences, and more engaging experiences.

John Peters is Accenture's U.S.-based global and industry leader for media, entertainment, and sports, advising media, entertainment, and sports organizations on growth, transformation, and consulting. Based in Los Angeles, his innovation practice works with clients across industries to navigate disruption, leverage emerging technologies, and create new sources of value and competitive advantage.