How Should Investors Approach Entertainment M&A?

Date Written: 26th February 2026
Author: Thomas Adnams
Key Takeaways:

A changing landscape in the entertainment industry - Streaming will drive increased M&A activity for the sector over the next 10 years. This is because the combination of film and cable assets with streaming assets could create lucrative, direct-to-consumer platforms.

‍Analysing mergers - Two recent merger deals will be analysed to see whether there are upsides to these integrations on underlying fundamentals, allowing us to advise investors on whether merged entertainment entities are worth allocating capital to.

Introduction

Things look to be heating up in the entertainment industry. Paramount and Netflix are in a ferocious bidding war, with offers rising from $82.7 billion to $108.4 over the last few months. Meanwhile, Sony has partnered with Singapore bank GIC to form a $1 billion+ music rights joint venture.

With streamers having gained significant scale and in some cases handsome margins, the competition is putting pressure on older conglomerates to see how more modern entertainment models can be integrated into business structures still somewhat dominated by legacy departments. This makes it likely that large-scale M&A deals in entertainment may pick up over the next decade, changing the landscape of the industry towards more diversified business models and ever further away from specialisation.

Given this backdrop, we believe it is interesting to reflect on previous M&A deals in the industry, and identify through technical analysis whether they were successful in strengthening the entity’s underlying fundamentals. Most importantly, we aim to identify any common upsides and downsides that investors should weigh up when looking to allocate money towards public entertainment entities that have undergone recent M&A deals.

In this article specifically, we will focus only on mergers. Before-and-after deal comparisons are simpler relative to acquisitions, as the firms involved are closer in size.

Article Methodology

To analyse the success of a merger, we first analysed the financials of the constituent firms merging before the deal occurred. We then analysed the combined entity after the merger. COVID years are excluded as not to penalise business structures that weren’t primed for resilient pandemic performance through little fault of their own.

The metrics used in our financial tables cover areas such as revenue performance, revenue lines, profitability, cash flow, the balance sheet, and firm-specific strategic metrics that may provide unique insights.

To allow consistent and fair comparisons across years and industries, key metrics are benchmarked. This is achieved through comparables analysis, with comparable firms being of a similar size and business structure to that of the relevant firm for the year/s in question. Areas of relative overperformance and underperformance can then be identified both before and after the deal, enabling us to determine whether a merger strengthened or weakened key metrics.

CBS × Viacom

Overview

The CBS Corporation, as its second incarnation from 2005 to 2019, was a multinational media company that focussed on commercial broadcasting, publishing and television productions. It was the first product of the 2005 breakup of Viacom, which CBS was a part of.

Some of its most significant achievements included:

A smaller Viacom was the other product of the 2005 breakup. Like CBS, it was deemed a multinational media company during its second incarnation from 2005 to 2019.

Unlike CBS, however, it was also considered an entertainment conglomerate due to its ownership of a major Hollywood film studio in Paramount Pictures, alongside a worldwide portfolio of cable networks catered to a range of age groups.

Some of its most significant achievements included:

The rationale behind the re-merger was to:

CBS

CBS 10-K 2018

CBS 2018 Benchmarks

Below are the key observations for CBS FY2018, before the merger:

The largest driver of revenue growth by absolute numbers was entertainment. This business line included functions such as:

The highest percentage revenue growth was recorded by local media. This business line included functions such as:

At the same time, revenue decline was recorded for cable networks and publishing. The cable networks business line included functions such as:

The publishing business line included functions such as:

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Viacom

Viacom 10-K 2018

Viacom 2018 Benchmarks

Below are the key observations for Viacom in the year to September 30th 2018, before the merger:

The largest driver of revenue decline by both absolute numbers and percentage points was in filmed entertainment. This business line included functions such as:

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CBSViacom/Paramount Global

Paramount Global 10-Ks 2023 and 2024

Paramount Global 2023/24 Benchmarks

Below are the key observations for Paramount Global (ViacomCBS) FY2023 and FY2024:

The largest driver of revenue decline by both absolute numbers and percentage points, in both 2023 and 2024, was in filmed entertainment. This business line included functions such as:

One business line that did record revenue growth in both 2023 and 2024 was Direct-to-Consumer. This business line included functions such as:

In light of these observations, this merger can be considered a material underperformance relative to benchmarks.

WarnerMedia × Discovery

Overview

Warner Media was a subsidiary formed from the acquisition of Time Warner by AT&T in 2018. 

This acquisition brought about many changes to the brand. The first change was the integration of Otter Media, which operated Crunchyroll, an anime streaming platform that distributes renowned cultural hits such as Attack on Titan and Demon Slayer. Another major change was the breaking up of its broadcasting assets into WarnerMedia Entertainment, which would consist of HBO, HBO Max, TBS, TNT and TruTV, and WarnerMedia News & Sports, which would consist of CNN Worldwide, Turner Sports and the AT&T SportsNet.

Some of WarnerMedia’s most significant achievements included:

Discovery, on the other hand, was a multinational television conglomerate that operated a group of factual and lifestyle television brands, such as the Discovery Channel, Animal Planet, Science Channel and TLC. It also ran major regional operations such as Eurosport and Golf TV.

Some of its most significant achievements included:

The rationale behind the merger was to:

Warner Media

‍Time Warner 10-K 2017

Time Warner 2017 Benchmarks

Below are the key observations for Time Warner FY2017, before the merger and with the firm {equivalent to Warner Media} being an independent entity with financial statements:

The largest driver of revenue growth in absolute terms was the Warner Bros subsidiary. This business line included functions such as:

The highest percentage revenue growth was recorded by Home Box Office. This business line included functions such as:

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Discovery

Discovery 10-K 2019

‍Discovery 2019 Benchmarks

Below are the key observations for Discovery FY2019, before the merger:

The largest driver of revenue growth in both absolute and percentage terms was advertising. This business line included functions such as:

Distribution also recorded handsome revenue growth, at 7 percentage points. This business line included functions such as:

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Warner Bros Discovery

WarnerBros Discovery 10-K 2024

WarnerBros Discovery 2024 Benchmarks

Below are the key observations for Warner Bros Discovery FY2024:

The largest driver of revenue decline, in both absolute and joint percentage terms, was networks. This business line included functions such as:

However, one area of revenue growth was in direct-to-consumer. This business line included functions such as:

We conclude that this merger was closer to a neutral, expected performance compared to that of CBS and Viacom, although the overall performance was still a slight net negative. This seems fixable with time, so it will be interesting to see what Warner Bros Discovery’s 2025 Annual Statement brings.

What Investors Should Take From This

Common upsides for merged entertainment entities

Common downsides for merged entertainment entities

Grey areas for merged entertainment entities

Therefore, investors should look at the following factors when determining the investment potential of a merged entertainment entity:

Regarding The Smart Money Show’s position, we would recommend that merged entertainment entities be approached cautiously by investors. Paramount Global recorded poor performance and Warner Bros Discovery did not produce any notable net gains. This suggests that the synergies cited by the firms’ boards pre-merger are often outweighed by fiscal drag post-merger, especially with regard to leverage position. Thus, these deals essentially substitute a problem of scale and infrastructure with one of weakening metrics, at least over the short-run.