Consolidation, mergers, and acquisitions are not a new phenomenon and has turned the media industry into an arms race. Netflix and its counterparts have been growing stronger in its disruption of the value-chain, along with tech outfits such as Google and Apple creating content plays. So what’s been driving all this consolidation and cross-pollination? For one, the buyout binge has been driven by the yearning for scale and global reach. Cable and satellite TV providers are combining forces to get more heft as the Internet shakes up the television industry. They face increased competition from digital platforms, and by merging, companies can bulk up on subscribers, giving them greater power to negotiate with entertainment conglomerates that supply content and at the same time greatly expand their international footprints.
The deal flow underscores the growing consolidation of the global TV production landscape, following the tie-ups of Endemol, Shine Group and Core Media Group, as well as the acquisition of all3media by Discovery and Liberty Global, and the buyout of Talpa Media. Broadcasters such as ITV have been relatively active on the acquisitions scene, as are pay-TV channel specialists such as Discovery and Scripps. Pay TV platform operators are making plays and a new consolidated giant is emerging in Sky Europe. In what is being hailed as a major deal, international television production and distribution companies Banijay Group and Zodiak Media have agreed terms in July this year to merge the two companies, who, between them, generate revenues of more than £640 million ($1 billion USD). This merger has created one of the biggest production and distribution companies not owned by a larger media company.
However, scale has pros and cons, with some industry experts viewing bigger businesses as not always the better route to take. While scale allows access to capital, offsetting of risks, giving more leeway to take risks, a global footprint and an access to distribution, it remains a challenge to manage creativity within a large group and retaining talent. With more players in the scripted game, such as Netflix and Amazon, there is competition for projects, writers and directors.
Broadcasters are also doling out a lot of cash for original content, increasing competition for premium channel-defining content in a cluttered landscape. With mounds of content floating around in some of the bigger companies, broadcasters and buyers alike are producing current shows in local versions instead of limiting the value of it to only one territory. Buyers are realising the value of storytelling, and there is now openness to ideas from all over the world. With a vast majority of the acquired companies, the biggest assets in these deals are the library of shows. There are different opinions as to whether bulking up would give better opportunities of getting a hit programme. However, market conditions make it tough for international hits to breakthrough.
In this ‘Golden Age of TV drama’, the strategy to striking deals is access to programming, especially scripted content. More bases, creative staff, and relationships with commissioners and buyers mean broader access to talent and ideas, which is crucial in content. In turn, this strengthens buying relationships. In terms of geographical consolidation, many well-resourced companies in the U.S. are driving the activity as buyers after having woken up to the opportunities that the international market offers. A challenge for the consolidators is to ensure getting the most of the scale achieved and that strategies and ideas are communicated throughout. Owning the IP is also an issue. As these companies expand, the traditional producer-broadcaster relationship evolves.
“Consolidation has been considerable and has had an impact on the industry thus far. It is a reality and a great way for content providers to control their output and maximize opportunities to exploit their assets. Indeed, it can be more difficult for independents to survive in the present climate of increased consolidation,” says Arabelle Pouliot-Di Crescenzo, Managing Director at Kabo International.
Oftentimes the bottom line is that there will always be new indie players. For these markets, the decision to sell can be a tough one, with many indie companies being used to the idea of being an independent. As the marketplace expands, producers built up companies that have reached the point where they are unable to grow without capital and access to international distribution.