The year of 2017 will be etched in history as the year that changed the media and entertainment industry landscape. Last year witnessed many important deals. The Disney-Fox deal is one that sent shock waves across the global media and entertainment industry as all companies in the industry were affected by this deal. Sony Pictures’ acquisition of Ten Sports and the AT&T and Time Warner merger extension also created shock waves.
Giving into the pressure and stiff competition, Viacom and CBS may also be joining hands again. CBS, home of hits such as “NCIS” and “Big Bang Theory,” is reportedly exploring the idea of merging with Viacom, which owns channels such as Nickelodeon, MTV and Comedy Central, as well as Paramount studios. If the two companies were to merge, the combined company would generate $27 billion in annual revenue, with 40 percent coming from advertising, 30 percent from affiliate fees, and 30 percent from content and some smaller segments, UBS analyst John Hodulik said on Thursday.
Analysts, however, feel an Amazon and CBS merger would prove to be a much bigger and better deal.
Here is the upside of an Amazon and CBS merger:
#1. With the growing popularity of online TV and movie streaming services, CBS could benefit a great deal from CBS shows and CBS could reach out to a huge audience.
#2. Due to increased funding, CBS could possibly compete better with other media companies by being able to bid higher for sports rights.
#3. Amazon’s operating margin is 3 percent and CBS’ operating margin is currently at 21 percent. Even if this margin was to be reduced to approximately half, CBS would have close to $1.3 billion to better spend on itself.
However, every coin has two sides.
If the two companies were to merge, there would be a wide range of challenges to consider. The most prominent one being control. With both Amazon and CBS being such big players in the market, both would want a greater say in the operations. This might lead to some disputes and discontentment, which might even turn strengths into weaknesses.
With both sides of the argument presented, the question remains to be answered whether Bezos will take the leap on this opportunity or not?