Why acquiring Paramount would transform Sony’s cross-entertainment future

When rumours began circulating of a Paramount sale, TV streaming was already entering a new phase. The industry’s biggest beasts have been locked in an all-out war for subscribers, spending and borrowing big to capture as much of the market as possible.

The streaming wars were in full swing, and the prospect of challenging Netflix seemed a viable option for not just Paramount, but Disney, Prime Video, Comcast, Max, and Apple TV+. However, the bid for Paramount Global by Sony Pictures Entertainment and the private equity firm Apollo underscore how the industry has shifted focus.

The days of cheap money are over. Profitability, stability, and efficiency are now in vogue, and interest rates have sky rocketed. Consolidation and cost-savings are vital. Paramount is entertaining Sony and Apollo’s $26billion all-cash offer because it cannot compete by remaining a mid-sized media player operating in a video silo.

Paramount’s future hinges on being part of a much bigger (and more diversified) entertainment company. With chief executive Bob Bakish leaving to make way for three division-level executives, Paramount appears to be clearing its decks ahead of an acquisition-shaped sea change.

Are the streaming wars over then? Has Netflix won? And must its competitors now come together to make the most of second and third place? Sony’s play here suggests otherwise. With Paramount in the fold, Sony could open a newfront in the streaming wars that puts its cross-entertainment strategy at the front and centre.

Accelerating Sony’s cross-entertainment future via Paramount’s IP and products

Content IP has remained a key priority for Sony’s strategic investments over the years, and the Paramount bid is no different. Thanks to PlayStation, Sony is a tour de force in terms of games content, which is by far its biggest segment for revenues. Sony also has a large presence in music, film, and TV, but its IP bank there – and potential for cross-media IP – are a little lower.

Enter Paramount. Adding Paramount to the PlayStation content library could be a game changer. Paramount Movies has distributed iconic franchises, including Mission Impossible, classic Indiana Jones, Transformers, and The Godfather. Below are just a few of the companies and IP under the Paramount umbrella:

• Nickelodeon (Teenage Mutant Ninja Turtles, SpongeBob SquarePants, Dora the Explorer)

• Comedy Central (South Park, The Daily Show)

• MTV (Jersey Shore, Jackass)

• CBS (boasting broadcasting contracts with the NFL, PGA Tour, UEFA, and others

Bolstering Sony’s arms dealer strategy

Such IP could prove pivotal to Sony’s arms dealer strategy. Rather than challenging Netflix directly with a significant direct-to-consumer service, Sony has opted to be the supplier feeding the industry’s insatiable need for movies and TV shows.

Sony struck five-year content supply deals with Netflix and Disney in 2021 that reportedly reached $2bn and $3bn respectively. Owning Paramount’s IP and back catalogue would give Sony the breadth it needs to strike even bigger supply-side deals in the future. Meanwhile, Sony would also own the Paramount studio lot, which boasts a pre-existing pipeline of movies and TV shows as well as being valuable real-estate given its prime position in Hollywood.  

Of course, this strategy would need fine tuning to marry up with Paramount’s slew of direct-to-consumer streaming services, including Paramount Plus (streaming Halo, South Park, and Knuckles),ad-supported Pluto TV, and SkyShowtime (a joint venture with Comcast in Europe).

Balancing the benefits of being a supply side player, with the costs of managing a significant direct-to-consumer streaming services is both a risk and a challenge. But Sony can minimise any missteps by leveraging the power of its gaming and hardware businesses.

Game adaptations and synergy

Paramount IP gives PlayStation a whole host of worlds and characters to play with. Putting these franchises at the fingertips of PlayStation Studios would be a huge boon, and could even attract audiences that PlayStation does not currently reach:

• IP-games work well, and PlayStation is a pro here: PlayStation has shown what it can do with IP games, thanks to Spider-Man. Its AAA studios are some of the most renowned in the world. Coupling these teams with Paramount’s huge IP (with a global baked-in audiences) could provide huge value for PlayStation.

•  Paramount has plenty of child-friendly IP:LittleBigPlanet has played out as a franchise and the Spider-Man games are for maturer audiences, so PlayStation could use Paramount IP to cater to younger generations. Well-made IP games in franchises like Spongebob and Dora the Explorer could be a huge hit for younger consumers.

• Synergies with Fortnite: Sony has a 5.4% stake in Epic Games, so it could leverage this partnership to bring more Paramount IP to Fortnite, establishing a connection with younger players.

• An ad-supported tier of PlayStation Plus:PlayStation Plus’s subscriber base is reaching saturation on console, yet thereare many consumers who are not willing to pay for the subscription but might beenticed by a cheaper advertising tier. The technology that powers PlutoTV andthe base tier of Paramount Plus has major synergies with PlayStation here.

A Sony subscription across games, music, and movies?

Bundled subscriptions will form the backbone of the cross-entertainment companies of the future. PlayStation already has a successful games subscription via PlayStation Plus, and it offers a video subscription, Sony Pictures Core, which features some of its TV shows, movies, and anime content via Sony’s ownership of streaming service Crunchyroll. As a perk, consumers who buy a new Sony Bravia TV also get movie credits to spend on Sony Pictures Core. Paramount content and technology could bridge the gap between these subscriptions, leading to a core Sony subscription across games, TV, movies, and music – all supported by Sony’s consumer hardware business.

Sony could leverage its large gaming subscription base, its impressive music library, its Paramount-boosted TV / movie roster, and even CBS’s sports partnerships to offer a unique subscription offering across various media types appealing to various demographics. One clear distribution opportunity would come from packaging up Paramount Plus with PlayStation Plus and targeting PlayStation Network’s near 130m users.

PlayStation’s cross-media operations would also contribute here. In the past year or so, Sony has launched cross-media offerings across The Last of Us, Gran Turismo, and Twisted Metal. Live-action adaptations of Ghost of Tsushima, God of War, and Horizon are also in the works at Sony’s PlayStation Productions.

Having all this content under one umbrella in one app –including an ad-supported tier –  could help bolster overall engagement with Sony’s IP and give it a bigger presence in today’s fiercely competitive attention economy. So far, Sony has struggled to fully realise the power of transforming its games, movies, hardware, and music businesses into a united force. Paramount could well be the binding agent it needs to bring this cross-entertainment promise to bear.

This article was co-authored by Rhys Elliott and Ben Woods