Over the next 18 months, proposed and pending mergers and acquisitions are going to completely change the media landscape. Even if only a few of them are completed, the impact will be felt across the value chain, Hollywood will be shaken to its core and we will live in a very different world. Here are just a few deals that, when taken together, should make you stop and think very hard.
Almost everyone who has standing to have an opinion about the Comcast/NBCU takeover of Time Warner Cable tells me that it will breeze through regulatory and is all but a done deal. I'm not sure anything breezes through regulatory, but I am sure that the deal will get done. If true, the stage will be set for the most transformative media ownership changes in history.
The new Comcast/NBCU/TWC will own the majority of cable viewers in the US. Inside of five to seven years, the distribution of content through Comcast's X1 platform will literally change everything we understand about video distribution. Analog television may be history, but the X1 is truly the next evolutionary step - it digitally distributes content to any device you own. And most of the cable TV households in America will happily pay for it monthly in cash as well as with their data. (Somewhere, George Orwell is smiling.)
I have $20 in the office pool and chose $105 per share as the number that gets Fox/Time Warner done. My side bet is that CNN goes for about $10 Billion to Al Jazeera in the deal. (Could anyone else pay more?) This deal really makes sense. 21CF and WB studios combined, the two cable groups combined, all the burdensome assets sold off for parts. At this size, the combined organization may actually be able to compete with the pure play digital media companies sucking dollars out of the television marketplace. $105 per share is big money when compared to the $85 Fox has actually offered. Will it happen? I say yes, but the final share price is anyone's guess. What about regulatory headwinds? After Comcast/NBCU/TWC goes through, how will regulators argue against Newscorp needing scale to compete?
This one's a head-scratcher. According to the FAQ on DirecTV's website, "This combination brings together two leading companies with complementary strengths and scale in mobility, video and broadband services. Together, DIRECTV and AT&T will be well-positioned to realize substantial incremental growth by offering consumers competitive and innovative broadband, video and mobile services. The combined company will cover 70 million customer locations with its broadband expansion and be a stronger alternative to cable with a better customer experience. Together, we will be well-positioned to meet the evolving video and broadband needs of the 21st century marketplace."
The consumer offering is compelling, but from a media perspective, this group of 70 million customers has no geographic concentration. So, while there is good ad targeting software in place, it is not going to efficiently compete for local or regional advertising. Nor will it offer an efficient buy on a national scale - the 70 million TVHH are scattered. That said, the merger is practically a done deal and the combination of AT&T and DirecTV creates technological powerhouse with a well-differentiated consumer value proposition.
Assuming all of the other mergers get approved, one can assume that the T-Mobile/Sprint merger will also be approved. Why wouldn't it be? This will create a truly formidable competitor for Verizon and AT&T. In practice, this will be great for consumers - regardless of what the anti-trust people would have you believe -- three good choices are better than two good choices and two low-cost, low-value, bad-network, also-ran choices.
But T-Mobile is killing it these days; look at what it has accomplished in the last quarter! While it's true that T-Mobile announced a series of milestones highlighting why it is the fastest growing wireless company in America, as a part of its Q2 2014 earnings report. And it announced it has launched nationwide Voice Over LTE (VoLTE) with more than 2.8 million VoLTE-capable devices. And has begun equipping sites with 700 MHz gear and field-testing its first 700 MHz-compatible devices... but it will still be much better and much more competitive when it is combined with Sprint.
Guessing At The Future
Let's play pretend. Assuming that all of this transpires. We can guess that Viacom will be broken up and sold for parts. The cable networks (MTV Networks and BET) will go to the highest bidder, as will Paramount (which was bolted on anyway). And no romp down "What Will Be" lane would be complete without mentioning that Sony (Columbia Pictures, Columbia Pictures Television, Sony Music Entertainment, Crackle) will find an interesting marketplace for its entertainment assets and, while we're guessing... Discovery Networks will probably be buying, not selling.
So, what might the media landscape look like in 2016? That might be the wrong question to ask. The better question might be: Which companies will be best positioned to sell media in a world where more primetime content is viewed online than on broadcast and digital media companies, specifically Google, Facebook and Twitter, are converting TV ad dollars to data-driven ad dollars at an alarming rate?
Who has a clear path to the future? Who has the best data gathering? Who can make their first party data actionable? Who has the best distribution platform? Who, to use a very overused metaphor, is skating to where the puck will be?
I have well-reasoned answers to these questions and a few more; shoot me an email and we can handicap the new world order. It's the best guessing game in town!