Wall Street wants big media to consolidate — executives don't seem that into it

Wall Street is ready for the next big media merger — but are the companies on board?

"While there may be speculation of what we could do next, I'd like you to hear it directly from me. I love the company we have so the bar continues to be even higher for us to do anything other than the plan you heard today," Comcast (CMCSA) CEO Brian Roberts said on the company's fourth quarter earnings call on Thursday.

Comcast, which posted a beat on both the top and bottom lines — amid good news, lower-than-expected broadband subscriber losses — is just one of a few media giants shrugging off rumors of consolidation.

Earlier this week, Netflix (NFLX) also splashed water on the idea, particularly when it comes to the streaming giant acquiring linear assets.

"We’re not interested," the company said in the earnings release. "Nor do we believe that further M&A among traditional entertainment companies will materially change the competitive environment given all the consolidation that has already happened over the last decade (Viacom/CBS, AT&T/Time Warner, Disney/Fox, Time Warner/Discovery, etc.)."

But that hasn't stopped analysts from making their own predictions.

Bank of America analyst Jessica Reif Ehrlich said in a recent note that Paramount (PARA), Warner Bros. Discovery (WBD), and Comcast's NBCUniversal are all "likely to be impacted [by consolidation] over the next 18 to 24 months."

She said it's possible two of those three players could merge. Paramount's stock, for instance, was up 5% Thursday, following reports that production studio Skydance Media wants to take all of Paramount private.

Media giants have been trying to appease Wall Street. Over the past year, these companies have launched mass layoffs and slashed billions of dollars' worth of costs, reflecting rising expenses and debt-ridden balance sheets that weighed on the sector in 2022. They rolled out ad-supported tiers, bundled their offerings, and raised the monthly prices of their respective subscription plans.

But all of that wasn't enough to satisfy investors. Valuation levels remain depressed. And streaming profitability still has a long way to go, with virtually all media companies (with the exception of Netflix) losing money on that business.

Those challenges, experts say, are why companies will begin to explore possible deals.

Meanwhile, Comcast's Peacock has been at the center of that consolidation debate.

The streaming service saw full-year losses come in at $2.7 billion, slightly ahead of company estimates. Management maintained that 2023 "marked the peak in annual losses," with the service expected to show "meaningful improvement" throughout 2024.

Comcast has been doubling down on its Peacock commitments with the company reportedly shelling out about $110 million to acquire the exclusive rights to one NFL playoff game. The purchase was a surprise to investors given Comcast's reliance on linear television.

"Streaming is inarguably the future," MoffettNathanson analyst Craig Moffett said in a new note to clients on Thursday, adding a frequent question from Comcast investors revolves around that future — especially given the company's reliance on linear television.

Moffett said management's recent actions surrounding Peacock give no indication of the company's next move, although Roberts's comments regarding a "a high bar" will likely fuel the M&A rumor mill even more.

"Most every conversation about Comcast starts — and usually ends — with media M&A," the analyst said, citing questions from a potential NBCUniversal spinoff to whether or not a deal would include linear networks.

"A more scaled streaming platform born of merging Peacock and, say, Max, would not only be more compelling to consumers, it would also presumably be less costly than trying to scale the two platforms on their own," the analyst suggested, adding Warner Bros.' intellectual property would also hold value for Universal's theme parks.

He added: "The logic of a deal, in other words, is obvious. But a deal would also increase Comcast’s exposure to a fundamentally bad business — or, at least, a business that is still headed into a long and painful trough as it transitions from traditional to digital distribution."

So would a deal be good or bad? Moffett said it depends.

"Brian Roberts reaffirmed his view that the company is happy with the assets they already have, and that the 'bar is very high' for anything other than this organic path forward," his note concluded. "That is surely not going to quiet the questions."

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on Twitter @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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