The recent news that Warner Bros Discovery (NASDAQ:WBD) and Paramount (NASDAQ:PARA) might have considered a merger left a lot of heads spinning in the entertainment market. In fact, memes have already begun to crop up, citing rights issues over “South Park” as one of the leading causes. But an already complex situation may be about to intensify, as new reports suggest that NBCUniversal (NASDAQ:CMCSA) may get involved. All three are down in Thursday afternoon’s trading, with Comcast, Paramount, and Warner down approximately 1.3%, 3.2%, and 3.7%, respectively.
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All of the merger talks, of course, are in the very early stages, so all of this may ultimately go nowhere. But, as we know, Warner and Paramount started up their talks only Tuesday. Even as the two started to map out what a future together might look like, thoughts turned to a third player: Comcast, the parent company of NBCUniversal. The two—potentially three—firms all have reason to come together. Each is starving for content in a world where new offerings are required much more frequently just to keep users’ interest and keep them paying monthly. None of them really has much of a picture of how to compete in such a world, so combining their efforts and sharing a strategy might be all the more effective.
Fraught with Peril
Yet, even as legacy studios confront the future, there are problems emerging already. The newer players in the game tend to have larger bankrolls than even studios. Worse, the studios are running into situations where many of their former revenue streams are gone. Selling DVDs is a perilous art, and the video store—which would have bought several, if not dozens of copies—is all but dead. Theaters are limping. And a major merger move would likely run afoul of regulatory skepticism. A merger might seem like the right move, but it’s far from an easy solution. Comcast, meanwhile, is in a similar situation and could bring plenty to the table itself. But with regulators likely to pan just two of them getting together, would three combined ever possibly stand?
Which Media Stocks are a Good Buy Right Now?
Turning to Wall Street, PARA stock is the clear laggard here, as this Hold-rated stock comes with a 1.2% downside risk against its average price target of $14.82 per share. Meanwhile, WBD stock offers a substantial 46.22% upside potential, as this Moderate Buy-rated stock comes with an average price target of $16.42 per share.
