Monday, June 16, 2014

The Necessity Of Media Mergers

Friday, I mentioned that the Univision news regarding possible suitors was the tip of the iceberg.  In today's Wall Street Journal, more speculation abounds.  Given the consolidation of cable operators, the slowing growth of TV advertising, and the threat of cord cutting to reaching more subscribers, content companies need to consolidate as well to leverage their value to a smaller base of operators.  In order to continue to raise subscription fees, content companies need to leverage their size as well along with the threat of loss of valuable programming.  That Time Warner Cable lost a significant number of subscribers during one such negotiation demonstrates how important that leverage can be.

While larger media entities like ABC and FOX may have the resources to weather a changing entertainment landscape, midsize media companies may need to consolidate to assure their long run stability.  The article looks at AMC, Scripps (HGTV, Food), Discovery, Viacom (MTV, Comedy Central) and even Time Warner (home of CNN, HBO, TNT) as smaller companies needing bigger parents. 

And while Netflix has been focused on digital distribution, they might also seek acquisition of a content creator to help fill their pipeline.  "Among studios Lions Gate Entertainment, maker of "Mad Men" and "The Hunger Games" movie franchise, is seen as a potential target. Sony Corp.'s studio is also viewed as a possible target."   Who is next to announce is anyone's guess.  But the authors agree with me that there should be more announcements coming.