Courtesy of Benzinga.
Time Warner (NYSE: TWX) is rumored to be interested in acquiring Xbox Entertainment Studios from Microsoft (NASDAQ: MSFT).
Few analysts were interested in talking to Benzinga about the rumor, which may turn out to be completely false given Microsoft's official statement on the matter.
Global Equities Research analyst Trip Chowdhry told Benzinga that he thinks it would be smart for Microsoft to sell the studio.
"Under the new CEO, Microsoft is focusing on the core businesses," said Chowdhry. "Anything else, they're probably going to divest in it. Who else may be interested in the studio? I don't know."
Albert Fried & Company analyst Rich Tullo told Benzinga that he thinks it is more likely that Microsoft will simply close the division and take the write-off.
Whatever happens, there are a few firms that may be interested in a buyout. Read on to see which ones could pick up the studio.
1. Lionsgate (NYSE: LGF)
Lionsgate struck gold when it acquired the rights to The Hunger Games. The first two films grossed more than $400 million in the United States alone.
Lionsgate had hoped that Divergent would prove to be another cash cow, but the first film ended its run at just $150 million. With an $85 million budget, the movie was profitable, but it is nowhere near the size of the Hunger Games franchise.
If Lionsgate wants another smash hit, the studio might want to examine Xbox Entertainment Studios. At the very least, this studio would give Lionsgate the chance to produce a movie based on the hugely popular Halo franchise.
2. CBS (NYSE: CBS)
CBS is known for producing some of the biggest and most critically acclaimed shows on television, including CSI, Under The Dome, The Big Bang Theory and The Good Wife. The company also operates Showtime, one of the world's largest pay-TV networks.
At first glance, Xbox Entertainment Studios may not seem like a good match for CBS. Unlike Lionsgate, this merger would probably have more to do with content proliferation than content acquisition.
By acquiring Xbox Entertainment Studios, CBS could begin deploying new content to the 48 million people who subscribe to Xbox Live. Those users were the reason why Microsoft got into entertainment in the first place.
3. Viacom (NASDAQ: VIA) (NASDAQ: VIAB)
Viacom could provide a good home for Xbox Entertainment Studios.
Viacom owns Paramount Pictures, which produces the Star Trek and Transformers movies. The studio once distributed films for Marvel and was expected to make $100 million from Iron Man 3 and The Avengers without spending a dime on their production or distribution.
Most of Paramount's biggest hits are action films, which would be a good fit for the content that Xbox Entertainment Studios had planned to produce.
Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.
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