What Skydance Must Get Right to Compete in the Streaming Wars

Marlee (0:00)

For more on what lies ahead for Skydance and the rest of the streaming space, let's welcome in James Czerniawski, Head of Emerging Tech at the Consumer Choice Center. James, great to have you on. I know you knew this conversation was coming. I was just waiting for this deal to close. And I'm not going to go so far as to say that the saga is over or the drama has ended, because as we've seen, that's likely untrue. So now that we have this deal closed after all of the legal and regulatory hurdles that we've talked about for these past several months, what is now the biggest challenge for Skydance to deal with?

James Czerniawski (0:36)

Thanks for having me, Marlee. And I think that, you know, it's good for this chapter, at least of the saga, to be done with. This deal getting closed and finalized was really important for both Paramount and Warner Bros. Discovery.

As I've noted in the program previously, that September 30th deadline was very important because they were going to have that ticking fee of about $7 million per day. So minimizing that was really important. Closing the settling rather the cases with the states, as well as with the Writers Guild of America. Let's now go and focus on the primary issue looking forward, which is now you have this massive content library. What are you going to do to basically leverage that to monetize it and get more money coming into this product here? Paramount went and paid a massive amount of money for Warner Bros. Discovery. So really, we've seen conversations already talk about maybe layoffs that are coming into the future.

We need to see how they're going to go and restructure CNN, CBS, all these other products that they have now acquired. But really, it's about what are they going to do to go and make it profitable? What kinds of ways are they going to leverage this massive library that they have and producing new things that consumers are going to be interested and engaged in? So really, that's what it ultimately comes down to because they did pay quite a premium for this when they got into that bidding war with Netflix.

Marlee (1:48)

Yeah, and that's really what the narrative has shifted to now is how can they actually create value here because they did pay such a premium? What needs to go right for this new Skydance to show that this massive investment was worth it and how quickly should investors expect to see any kind of tangible evidence that at least this combined company is operating more efficiently?

James Czerniawski (2:16)

Yeah, I think in terms of the timeline, it's going to take a little bit of time, understandably so. I mean, it's even something that they acknowledged in their release when they talked about closing this deal. They need to go and integrate to two companies. That's going to take time. They have commitments now to go and release over 30 theatrical films every single year.

A certain number of them have to be blockbuster films. They're going to be doing independent films.

There's definitely a lot to be seen. Those being successful and being very, very good products are certainly, I think, a hinge on their ability to hopefully go and regain on that massive investment sooner rather than later. That's a big part of it. But also, I think it's about figuring out how they can go and direct more subscribers to their platforms. They have Peacock and Paramount. What are they going to do to go and grow that out? Are they going to explore more creative ways of bringing in revenue like we've seen with Disney and this partnership with TikTok for the creation of content on that platform as they're coming up with new releases? Can we see some things maybe coming into that vein perhaps? Those are the kinds of things that I think would go and indicate a path to profitability and a return on that massive investment. But in terms of the timeline, I'm expecting at least a year or 18 months before we see an actual mounting evidence of them having good sustained success here because, again, it's going to take a hot second for these firms to integrate, get the kinds of changes needed to see their vision come to fruition.

Marlee (3:33)

Well, and certainly in that hot second, they've agreed to some pretty lofty requirements in terms of releases. We talked at length about these. They really paved the way for the deal to close. But 30 films a year, blockbusters for independent films, does this force Skydance to prioritize volume over profitability? Because those are not negotiable.