Since the advent of video streaming just a decade ago, the media landscape has undergone a paradigm shift, and companies that once ruled the roost are scrambling to achieve greater scale. Some of the biggest names in entertainment are seeking like-minded partners for fear of being overtaken by streaming giants like Netflix (NASDAQ:NFLX) and its biggest video competitor, Amazon (NASDAQ:AMZN), home of Prime Video.

While AT&T finally won the right to acquire Time Warner, the challenge continues between Disney and Comcast to see who gets to take Twenty-First Century Fox to the ball.

One analyst recently suggested that Amazon should make a bid for CBS (NYSE:CBS) to acquire its library of content and a string of hit shows. But it's a little more complicated than it might seem.

Two profile figures pushing together two giant puzzle pieces.

Image source: Getty Images.

Playing matchmaker?

Michael Nathanson, founding partner and senior research analyst of MoffettNathanson, suggested that the most efficient way for Amazon to expand its content library would be to buy a media company -- and he believes CBS is a likely candidate. In a note to clients, Nathanson wrote:

Rather than build it out over time, we wonder if Amazon would embrace a "buy it" model and seek to acquire a traditional media company with content creation skills, deep proprietary content libraries, sports production capabilities, and burgeoning OTT ambitions. Of all the companies available, CBS is the most logical fit. 

The OTT (over-the-top) platforms in question, CBS All-Access and Showtime, have about 5 million subscribers combined. Nathanson said that while Amazon Prime Video is a hit with the 18- to 34-year-old demographic, the biggest reason it trails its streaming rival is Netflix's massive and growing content library. He believes Netflix's head start would make building a worthy competitor a time-consuming proposition, one that might be hastened with an acquisition.

CBS might fit the bill, with some of the most-watched shows on television, including NCIS and CSI (and several spinoffs of each) and The Big Bang Theory -- currently the most popular comedy on TV -- as well as standards like 60 Minutes and popular procedural crime dramas like Hawaii Five-O and Criminal Minds. Its lineup has beaten out all other major networks, winning the most 18- to 49-year-old viewers coveted by advertisers in 13 of the past 14 years. The company also owns an estimated 80% of its programs. 

We don't know what Amazon is thinking, but if it were to follow this path, before it could consider acquiring CBS, there's a soap-opera worthy plot line that would need to be resolved. 

Couple cuddling on the couch smiling watching TV with man holding the remote.

 

Worthy of must-see TV

Here's the background: National Amusements is controlled by media mogul Sumner Redstone and his daughter Shari, and it, in turn, owns 80% of the voting shares of both Viacom (NASDAQ:VIAB) and CBS -- which amounts to 10% and 9% respectively of those companies' stock.

The pair have been pushing for CBS, which has been doing just fine on its own, to acquire Viacom, which hasn't been. The Redstones hope that CBS will be able to rescue the black sheep of the media family, but CBS doesn't want to be saddled with its ailing sibling. 

Last month, CBS's board of directors, led by CEO Leslie Moonves, filed suit against National Amusements, attempting to block the merger. The suit argues the company is breaching its fiduciary duty, and the combination carries "a significant threat of irreparable and irreversible harm to the Company and its stockholders." The evidence to date seems to support that theory. Since the discussions began in mid-20017, CBS stock has fallen nearly 20% -- which CBS noted in its lawsuit.

While the suit plays out in court, CBS's board of directors planned to issue a dividend of Class A voting shares to all stockholders, which would effectively strip the Redstones of their voting majority. National Amusements sought to nullify the dividend by requiring a super-majority board vote. A group of stockholders then filed another lawsuit -- and a ruling by the judge last week allowed both trials to proceed, both of which are scheduled to begin in October. 

Courtroom drama

We will have to wait for the outcome of the two trials to see if Amazon is even remotely interested in courting CBS. Amazon has previously shown that it isn't averse to making massive deals if it believes there's a strategic fit and competitive advantage to be had (ahem, Whole Foods).

Until then, Amazon will just have to build its library the old-fashioned way -- one show at a time.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Amazon, Netflix, and Walt Disney and has the following options: long January 2019 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Amazon, Netflix, and Walt Disney. The Motley Fool has a disclosure policy.