The Consolidation Imperative The global entertainment and media industry is navigating two realities simultaneously. Legacy businesses are bending under structural pressure, while new distribution, technology, and experiential models continue to accelerate . The numbers tell the story. Traditional television revenues are declining, with cable networks that once enjoyed 40-50% profit margins now seeing those numbers shrink substantially . Meanwhile, advertising spend continues to shift to digital platforms, and streaming services, while growing, have yet to match the profitability of the cable era.
According to Bank of America Senior Research Analyst Jessica Reif Ehrlich, the media sector is currently navigating a period of consolidation driven by the need to achieve the necessary scale amid the decline of linear television and the high costs of streaming . Legacy entertainment conglomerates are increasingly pressured to merge, seeking to combine libraries and infrastructure to compete effectively against capitalization-rich, tech-native platforms that operate with fundamentally different economic incentives.
In response, streamers and broadcasters are crossing “frenemy” lines. AlixPartners predicts dozens of partnership agreements will be struck in 2026, increasing the sharing of content, technology, and distribution . As subscriber growth cools to an estimated 5% next year, cooperation has become a survival strategy alongside competition and consolidation .
The Tech Giants’ Hollywood Invasion Following years of speculation about their strategic intentions in media, the largest digital platforms are now fully engaged in the entertainment industry . They are competing to secure scarce intellectual property, rationalize a fragmented streaming environment, and achieve scale advantages that traditional media players simply cannot match. Their participation may serve as a catalyst for broader realignment across content libraries, sports rights, and distribution systems.
The convergence of YouTube and Netflix is particularly notable. AlixPartners predicts that over the next year, the ad-revenue giant YouTube will offer more Netflix-style content experiences to boost subscribers. Netflix, meanwhile, will increase its share of short-form, mobile-based content in a push for more advertising . Mark Endemaño, Partner & Managing Director and EMEA Media lead at AlixPartners, describes this convergence as “far from trivial. As these giants battle it out for No.1 the strategies they turn to will provide a blueprint for competitors to follow as they try to catch up in the streaming wars.”
The Mid-Tier Squeeze The consolidation wave is not affecting all players equally. While scaled players will emerge as winners in the media ecosystem, sub-scale companies will struggle to generate steady growth. Sub-scale streamers in particular are still struggling to turn a profit, impacted by lagging engagement and high churn .
Ultimately, the industry is expected to consolidate around three to four mass market streamers, with room for smaller, more niche services on the periphery . AlixPartners predicts that two of the mid-tier platforms will either consolidate or establish deeper distribution partnerships to challenge the leading platforms and reshape the streaming hierarchy in 2026 .
Parks Associates director of entertainment research Michael Goodman offers a sobering assessment of what consolidation means for content: “Streaming consolidation is likely to mean fewer shows overall, with budgets and attention concentrated on bigger, safer bets. Mid-budget and niche originals are more likely to be cut, shows will be given less of a chance to prove themselves and will be canceled faster, and franchises, sequels and event programming that can travel globally and reduce churn will be prioritized” .
Private Equity Enters the Arena Private equity investors are returning to the entertainment sector after a period of caution. According to AlixPartners, these investors are concentrating on sector-specific theses that combine recurring revenue, operational value creation, and defensible market structures . Specifically, private equity and growth investors are focusing on enabling infrastructure that powers interaction-led growth, buy-and-build in creative tooling and monetization, and co-financing or partnerships in IP and distribution platforms . The resurgence is being driven by lower capital costs, reduced regulatory scrutiny, and the intense pressure to invest in transformative technology, particularly AI.
The Role of AI in M&A and Operations AI is both a driver of consolidation and a tool for operational efficiency. Acquiring AI capabilities has become a key motivation for M&A activity. AlixPartners expects acquirers to prioritize transactions that offer AI capabilities around ad targeting, content automation, and workflow efficiency . At the same time, AI is being deployed extensively behind the scenes in film and television production to improve efficiency and reduce costs. Studios are using AI for previsualization, storyboarding, marketing and analytics, scene extensions, and rotoscoping .
IP licensing deals for AI can provide new revenue streams and establish a legal framework for copyright protection. Ultimately, AI will help strip away operational friction and cost, offering an opportunity to see margin improvement or for savings to be reinvested into higher-quality content and bolder creative risks . However, these benefits must be balanced against AI-related risks. As high-quality content becomes easier to produce outside the studio system, a surge of low-cost, AI-generated material could erode the value of premium entertainment and intensify competition for audience attention .
Bundling and Distribution Partnerships Bundling has returned as a key strategy for both growth and retention. Parks Associates predicts that bundles will continue to increase in 2026, as services that are raising prices look to offer more value for price-conscious consumers . Instead of subscribing to services individually, a growing segment of the population will buy a bundle of SVOD services, either through the services themselves, TV providers, or broadband and mobile bundles, as this helps mitigate price increases and reduce churn .
On the live-TV side, more skinny and genre-specific bundles such as sports, news, and entertainment are expected, similarly to what YouTube TV and Sling TV are already doing . Sports content has become the ultimate test of cooperation. With U.S. sports rights surpassing $30 billion annually and split among multiple players, fragmentation has forced unlikely alliances. ESPN and FOX’s 2026 joint bundle exemplifies this shift, offering combined access at a discounted rate. As audiences seek simpler access to live content, “frenemy” collaborations are becoming the norm .
Conclusion The entertainment industry is at a strategic inflection point. The old models are not returning. Companies that can achieve scale, embrace AI responsibly, and navigate complex partnerships will emerge as winners. The consolidation wave is reshaping the competitive landscape, with scaled players poised to dominate while sub-scale companies struggle to survive.
For consumers, this consolidation means fewer standalone services and more bundled offerings. It likely means less experimentation in content, as platforms focus on safer bets and proven franchises. But it also means a more streamlined, potentially less frustrating viewing experience as the industry moves toward a smaller number of dominant platforms.
The next phase of the streaming wars and broader entertainment consolidation will reward adaptability, partnership, and consumer-centric design. The decisions made in 2026 will shape the entertainment landscape for years to come.
