Major technological shifts, from the dot-com boom to artificial intelligence, have long rattled the media business.
Over the years, many legacy media companies have adapted to a quickly changing landscape by doing the same thing: trying to get bigger.
The result has been a series of Frankenstein-like "monsters," or mergers that have inevitably collapsed as grand theories have collided with reality, Barclays wrote in a note Friday.
Analyst Kannan Venkateshwar said legacy media companies have repeatedly attempted to address technology-driven shifts by acquiring content scale, mistakenly viewing new technologies merely as cheaper distribution channels for existing products.
He analyzed Warner Bros., which he sees as a key example for these attempts.
Warner Bros. has had a long history of high-profile and volatile mergers. The motivation was simple: create a dominant media empire. What transpired instead were collapses due to poor timing, intense cultural clashes, and strategic miscalculations, he wrote. Each merger was meant to navigate a shifting media landscape, yet each attempt misread where the competitive leverage actually lay.
At the height of the dot-com boom, America Online, known as AOL, bought Time Warner as a way to pair an expiring dial-up gateway with legacy content, assuming the internet would work like digital cable. But the dot-com crash ended up wiping out AOL's stock value and dial-up internet collapsed as broadband rose.
Almost two decades later, telecommunications giant AT&T acquired Time Warner for about $85 billion, renaming the entertainment arm WarnerMedia. AT&T tried to leverage studio content to sell its mobile data plans, but the venture collapsed.
Venkateshwar noted the deal failed to recognize that Netflix's advantage was its software and ease of discovery, not its pipe ownership. The deal's high debt also restricted necessary transition investments, he noted.
In 2022, AT&T gave up on those entertainment ambitions, spinning off WarnerMedia to merge with Discovery Inc. in a $43 billion transaction, creating Warner Bros. Discovery, led by David Zaslav. But trouble loomed: the company inherited the decline of cable TV and high debt, pushing Warner Bros. to pursue corporate restructurings and studio asset sales.
The recent merger with Paramount, which finalized earlier this week to create Skydance, has only added to the pile of repeated mistakes, Venkateshwar noted. He said the deal expands content scale at a time when artificial intelligence has shifted value toward conversational interfaces, agents, and personalized experiences.
"Today most closely resembles 2000 as the direction of travel is clear, but the winning architecture is not," Venkateshwar wrote Friday.
Instead of opting for megamergers, Venkateshwar advised legacy media companies to adopt three primary strategies.
First, he recommended that businesses invest in future technologies without taking on massive financial risk. He pointed to Disney's recent investment in Epic Games and Webtoon, which veered away from a potential acquisition.
The analyst added that companies should move away from isolated streaming catalogs by licensing intellectual property through clear permissions and revenue sharing to let external developers make stories interactive.
Lastly, Venkateshwar wrote that legacy media companies should focus on how content is found and personalized through AI rather than simply creating more shows. Ownership of this user interface, he believes, could grant far more leverage than raw catalog size.
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