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Streaming bundles: A new era has arrived

Media companies like Disney (DIS) and Warner Bros. Discovery (WBD) used to compete for subscribers to their streaming services. Now, they are looking to team up too.

Disney's ESPN, Warner Bros. Discovery, and Fox (FOXA) announced they would launch a sports streaming service this upcoming fall. Meanwhile, Paramount (PARA) and Peacock owner Comcast (CMCSA) have held discussions about a potential joint streaming venture, according to a report in the Wall Street Journal.

The developments come as media companies face pressure from investors to scale their streaming services and achieve profitability. At the same time, the companies are dealing with more competition from tech giants like Amazon (AMZN) and Apple (AAPL), which are gobbling up streaming deals.

"Big tech is now in this game," Jon Christian, executive vice president of digital media supply chain at Qvest, a media and entertainment-focused consulting company, told Yahoo Finance. "These are highly diversified businesses that have a lot of money. It's a much different set of competitors for these legacy networks and studios."

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As a result, consolidation through mergers and acquisitions or partnerships is the only way for these traditional players to compete, according to Christian.

"At the end of the day, you have to look at the consumer and ask, 'What is the least amount of friction for the end user to be able to view my content?'" he said.

The concept of bundling isn't new. Companies in the space have been doing it with their own services. Apple, for instance, offers Apple One, which combines Apple TV+ with other services like Apple Music and Apple Arcade. The bundle launched globally in late 2020.

Disney, which also has been offering a bundle with Disney+, Hulu, and ESPN+, officially began its domestic rollout of a one-app experience late last year that incorporates Hulu content via Disney+ — a similar play to Paramount's Showtime combination as well as the integration of HBO Max and Discovery+, which both merged their respective services last year.

The move toward partnerships among competing media companies, though, is different.

"It's more of an evolution as the industry matures, and the focus has become on maximizing profits," Morningstar analyst Matthew Dolgin told Yahoo Finance.

Combining forces does create certain complications. For instance, there’s the question of how to share content without giving away all the goods.

Dolgin cited Disney partnering with other companies on a sports streaming service despite its eventual move to bring ESPN fully over-the-top as one example of this tension: "Now with this joint venture, how does [Disney] navigate having nothing necessarily 'exclusive' on one platform?"

Another key question will be whether or not consumers pay up for à la carte services on top of bundled plans, which often boast greater value in the minds of subscribers.

Still, Dolgin said the strategy could lead to more loyal customers and lower churn, or cancellations.

"It's the most efficient way for these companies to reach their customers," he said.

Media companies are partnering on new streaming bundles in the hopes of gaining a more loyal audience.
Media companies are partnering on new streaming bundles in the hopes of gaining a more loyal audience. (Serhii Bilohubets via Getty Images)

Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.

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