![The Media Conundrum](https://www.filmtake.com/wp-content/uploads/2024/01/The-Media-Conundrum.jpg)
In the ever-evolving world of media and entertainment, the dynamics are shifting faster and faster. Last year showcased a mix of strategic moves, mergers, and acquisitions that have set the stage for a transformative year in 2024.
Many forces are at play in the media industry, from Paramount’s financial pressures to Warner Bros Discovery’s strategic options, profitless direct-to-consumer streaming, and unstoppable declines in linear television subscribers.
The most likely pure-play merger in the coming year is between Warner Bros. Discovery and Paramount.
The Road to Consolidation
Unstoppable declines in linear television subscribers and, therefore, advertising dollars coupled with challenges in achieving profits in freshly minted streaming services have led most media companies on the road to consolidation.
To prepare for the rough road, these media empires have slashed billions in content spending, started mass layoffs, launched advertising tiers on their streaming platforms, bundled services with competitors, and significantly raised monthly fees for their streaming subscribers. However, all these moves were in vain as their valuations have continued to fall. Worst still is the long road to achieving direct-to-consumer streaming profitability, which remains elusive for all but Netflix.
The days of cheap money are over for now as interest rates continue to climb, which has sent many companies searching for unprofitable divisions to unload on cash-rich private investors. Even heavy-weight Disney hints that its traditional television business could be on the chopping block, including its broadcaster ABC and cable channels National Geographic and FX.
Over the next 12 months, consolidation will likely impact Paramount, Warner Bros. Discovery, and NBCUniversal. As the industry’s small fry, Paramount has long been a target of acquisition due to its small market cap and notable disjointed management. Paramount’s falling $9.14 billion market cap pales compared to Disney’s $174 billion and Netflix’s $212 billion value.
Although announced in August 2023, Liongate’s acquisition of eOne’s film and television production divisions closed on the eve of 2024, setting the stage for further consolidation among small and mid-sized production companies and distributors in the coming year.
Lionsgate closed its $500 million acquisition of Entertainment One from toy company Hasbro, including $375 million in cash and an assumption of eOne’s production financing loans.
The acquisition adds 6,500 film and television titles to Lionsgate’s existing library but crucially excludes eOne’s most valuable asset, its Family Division, which remains with Hasbro. The film and television assets are the second and final division Hasbro carved off after eOne’s music business was sold for $385 million to Blackstone in 2021.
Worldwide Film & Television Distribution Intelligence
Get unparalleled access to market intelligence reports that draw on financial data and insights from dozens of content distribution deals worldwide between key industry participants, including — Distributors, Producers, MPVDs, and Streaming Exhibitors.
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Film and Series distribution rates and terms deriving from dozens of agreements for rights to transmit films and episodic television via PayTV and SVOD.
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Licensing Terms & Included Programs:
Pay-1 & SVOD Rate Cards for Motion Pictures and Series Exhibited Worldwide in Multiple Availability Windows
- Motion Pictures: Pay-1, First Run, Second Window Features, Recent Library Features (Tiers AAA,A,B,C), Library Features (Tiers AAA,A,B,C), Current and Premium Made-For-TV Films and Direct-To-Video Films, covering many license periods over the last decade
- Episodic TV: Current, Premium, Premium Catalog (1HR & 1/2HR), Catalog Series (1HR & 1/2HR), and Catalog Miniseries + Case Studies on Current Mega Hit, Catalog Mega Hit, and Premium Catalog, covering many licensing terms from 2012-2024
- Because most-favored-nation rates operate in practice, the rates and terms apply to a diverse range of content and distributors worldwide in multiple availability windows.
The Forever Quest for Consolidation
As streaming services disrupt traditional cable television, media companies seek ways to stay relevant and competitive as more technology companies continue to capture marketshare. The urge for consolidation is purportedly driven by a need for scale, access to content libraries, and a growing emphasis on a complex array of direct-to-consumer streaming offerings.
Paramount’s Dilemma
Paramount is at a crossroads, facing financial pressures and exploring a potential sale. With declining assets and uncertainty about streaming profits, its controlling shareholder is considering various options, including discussions with Warner Bros Discovery and Skydance Media. However, the challenge lies in finding a suitable buyer willing to tackle the complexities of linear networks, the company’s fading crown jewel.
Warner Bros Discovery’s Tax Window
Warner Bros. Discovery, on the other hand, has a strategic advantage with a tax penalty on transactions expiring in April. While some argue for a focus on debt reduction, the allure of a merger remains enticing, especially for deep-pocketed players like telco giant Comcast.
Warner Bros. Discovery and Comcast’s NBCUniversal are the two most likely buyers out of the Big Five. Still, Apple, Amazon, and Netflix remain contenders to pick up a studio or particular assets of one, especially when discounts abound.
Lionsgate’s Split and Potential Merger
Lionsgate Studios is set to split from Starz in early 2024, creating two standalone entities ripe for acquisition. This move provides opportunities for both organic growth and external consolidation. Furthermore, speculation looms about a potential merger between Fox and News Corp.
However, after years of delays, Lionsgate has failed to deliver on several purported deals conveniently leaked to the press—more on the history of the Lionsgate and Starz saga below.
The Never-Ending Story: Lionsgate’s Financial Maneuvers and the Fate of Starz
The much-delayed spinoff of Starz was initially sold to investors as a way to unlock value by selling all or most of Starz but has now morphed into a way to separate and sell Lionsgate. The details remain murky after nearly two years of delays.
Continue Reading >> The Never-Ending Story: Lionsgate’s Financial Maneuvers and the Fate of Starz
Amazon’s Strategic Investments
Amazon is eyeing a significant investment in a company holding local broadcast rights for numerous sports teams. This move signals Amazon’s ambition to bolster its sports streaming offerings and challenge industry giants like Netflix. MGM has yet to set the world on fire after being acquired by Amazon, but this year will reveal the direction the former great studio will embark upon.
Disney’s Expansion and Search for Partners
Disney is making strategic moves, including a non-binding agreement to merge its Indian business with Reliance Group and seeking a strategic partner for ESPN. These steps reflect Disney’s commitment to diversifying and transferring risk to new partners. Disney could shock everyone by offloading its broadcaster, ABC, as hinted at in the past. Its cable channels, National Geographic and FX, are likely also up for grabs.
FilmTake Away: Media Moves and Mergers
Producers, distributors, content owners, and creators must be prepared for an unpredictable and rapidly evolving landscape, which can deliver folly or opportunity. The moves made in 2024 by the largest producers and distributors of film and television will reshape the industry’s future in unprecedented ways.