Media mergers: who’s next?
In this photo, illustration shows the HBO Max and Discovery Communications logo displayed on a smartphone.
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NBCUniversal and Lionsgate
Purchase Lionsgate would help Comcast’s NBCUniversal on two different fronts. First, it would add more content to Peacock, NBCUniversal’s subscription video service. Lionsgate owns shows such as “Mad Men”, “Orange is the New Black”, “Nashville” and “Zoey’s Extraordinary Playlist”. Lionsgate currently licenses these shows on a number of streaming services.
Second, Lionsgate owns the Starz premium network, which would integrate seamlessly with NBCUniversal’s offerings. NBCUniversal does not have a premium network, unlike competitors WarnerMedia (HBO) and ViacomCBS (Showtime).
On the streaming front, a Starz-Peacock combination – either together as one service or separately as a bundle – could expand NBCUniversal’s global aspirations. Starz on track to have 60 million subscribers worldwide by 2025, CEO John Feltheimer said this week. Starz is already available in 58 different countries, which would give Peacock a head start in its expansion aspirations.
And Lionsgate wouldn’t be expensive, with a market cap of just $ 3.8 billion (an enterprise value of around $ 6.4 billion). If Comcast is to keep NBCUniversal – against AT & T’s decision to ditch vertical integration – buying Lionsgate would be a smart move to stay competitive in the streaming wars without breaking the bank.
WarnerMedia-Discovery and ViacomCBS
There is already speculation about a possible future merger between the new entity WarnerMedia-Discovery (assuming the deal goes through) and NBCUniversal. Discovery’s majority shareholder John Malone told CNBC how the merged company could be open to a future merger with NBCUniversal if regulatory forces allow.
But the divestments that may need to take place could be too complicated and tax inefficient for this combination to happen. Regulators might not allow CNN and MSNBC to be hosted under one corporate roof. Combining Universal from Comcast and Warner Bros from WarnerMedia – the 2 and 3 largest film studios by box office revenue in 2019 and 2018, the last full years of theatrical releases – can also be a non-starter.
The most logical combination would be WarnerMedia-Discovery and ViacomCBS.
Shari Redstone’s company has a broadcast network – CBS. WarnerMedia-Discovery doesn’t, so it’s an adjustment. (Combining CBS and NBC under one roof would be a major obstacle to a ViacomCBS-NBCUniversal merger.)
Unlike NBCUniversal, ViacomCBS does not have a large cable news network. It makes CNN more viable.
While ViacomCBS also owns a film studio, Paramount has been a much smaller box office presence than Universal in recent years. Among global movie studios, Paramount was sixth in terms of box office revenue in 2018 and 2019. Combining Paramount and Warner Bros. would be an easier sale for antitrust reasons.
The biggest complication would be if Redstone is willing to give up or dilute its controlling shares of ViacomCBS. This is what Malone did to bring Discovery and WarnerMedia together, so now there is a model.
Disney and AMC networks
This is the most difficult sale. Disney doesn’t really need AMC networks. It goes perfectly with the content that it has.
But with the Hulu license owned by Disney, much of its content is vulnerable to the loss of some of its hit shows. MGM, for example, does “The Handmaid’s Tale”. Now that Amazon has acquired MGM, it’s unclear whether the series will stay on Hulu once the deal is done.
The owner of “The Walking Dead”, IFC Films and Sundance Now could provide a boost to adult-themed content on Hulu. This would balance the robust offering for kids on Disney + and sports on ESPN +. AMC has planned it will have at least 9 million streaming subscribers by the end of 2021 and 25 million by the end of 2025. This is a far cry from Hulu’s current 41.6 million or Disney +’s 103.6 million, but it is proof that there is at least some audience for programming.
And while the cable is slowly dying, it’s not dead yet, with approximately 85 million American households you still subscribe to some form of bundled linear television.
Disney’s ESPN remains the cornerstone of the traditional pay TV package. Bundling AMC Networks’ cable networks with ESPN would protect affiliate fees, as pay TV providers have historically been reluctant to ditch ESPN.
The Dolan family controls the AMC networks. The Dolans have probably known for years that AMC Networks is a subscale and should combine with a bigger media fish. If the Dolans don’t want to sell, they won’t. But AMC Networks is relatively tiny at $ 2.2 billion in market value and around $ 4 billion in enterprise value. Disney could easily buy the company in cash.
However, previous Disney acquisitions – Pixar, Marvel, Lucas Films – were about intellectual property. Does AMC Networks have enough valuable IP to make a transaction worthwhile for shareholders? And is this IP family-friendly enough to fit into the company’s theme park operations?
Maybe that’s why a Disney-AMC deal hasn’t already happened.
Disclosure: NBCUniversal is the parent company of CNBC.
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