Direct-to-Consumer Focus May Mean No Huge TV M&A in 2020
Don't expect big, transformative mergers and acquisitions in entertainment and media this year, experts said in recent interviews. Instead, companies are focused more on direct-to-consumer offerings and on integrating and rationalizing the properties they have, analysts and lawyers said.
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Big takeover targets already "are gobbled up," said wireline and wireless lawyer Laura Phillips of Drinker Biddle. Entertainment industry lawyer Paul Bernstein of Venable said there's interest in opportunistic deals like buying content libraries, but 2020 and 2021 will be a "war of attrition" in streaming service competition after having bulked up content holdings. "Now, people are going to start firing their rockets," with casualties being the money burned through, he said. Echoed TVRev analyst Alan Wolk, "Everybody is kind of waiting to see how 'flixopocalypse' plays out."
"The next decade will be the stage for a clash of titans," LionTree CEO Aryeh Bourkoff wrote investors. He said major media and communications businesses that survived competition in recent years from emerging challengers are well positioned and won't face new competition that matches their scale. The scale of incumbents will limit some startups and the number of potential buyers, meaning more M&A among smaller or mid-sized companies, he predicted.
Any deals proposed this year would likely be noncontroversial, on uncertainty about what the FCC and DOJ antitrust makeup could be post-election, said a cable lawyer with M&A experience. Broadcast deals are possible, though much of the rest of the video market is consolidated, said New Street Research's Blair Levin. Questions remain if Comcast might buy T-Mobile regardless of whether T-Mobile/Sprint happens, he said. If T-Mobile/Sprint gets final court OK, other telecom transactions very well could emerge to keep up with the stronger New T-Mobile competition, he said.
There's an increased bipartisan sense antitrust enforcement hasn't been as aggressive as it should be, creating urgency in business to complete deals before DOJ gets more aggressive, perhaps under a Democratic administration, Levin said. If T-Mobile/Sprint gets blocked in federal court, it could create a dynamic where states, DOJ and FCC agree less than they traditionally have on transaction reviews, he said. Echoed Phillips, state opposition to T-Mobile/Sprint points to a political environment where some Democratic states are increasingly willing to challenge federal regulatory decisions and do their own policing.
A big investment community question is whether anyone -- particularly a tech company like Apple or Google or Facebook -- might want to buy Netflix, Levin said. The current antitrust focus on Facebook and Google might make such a deal difficult, though, he said. Added Vernable's Bernstein, the speculation about Apple buying Netflix seems unlikely since Apple seems to be dipping its toe into streaming video as an ancillary service.
TVRev's Wolk said major streaming service M&A and consolidation is at least three to five years off because they're well funded. He said there's an outside chance ViacomCBS might buy Discovery for increased size to compete with Disney or AT&T. He said instead of M&A, there could be more activity in partnering and bundling media services, such as offering another company's streaming music service alongside a streaming video product.