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Will more media dominos start falling in a new media M&A merry-go-round? That is a question Wall Street is asking after news of the mega-combination of Discovery and AT&T’s WarnerMedia. If so, which media and entertainment players could accelerate possible deal plans or become more aggressive — or even spoil the Discovery-WarnerMedia party with an alternative bid?
One banker, speaking with The Hollywood Reporter, mentioned medium-sized and smaller companies that could be in play, such as Lionsgate and an always popular object of M&A chatter, the post-bankruptcy James Bond studio MGM, which started exploring a sale late in 2020. AMC Networks has also been floated as an appealing takeover target for sector giants in the past, even though its management team has repeatedly expressed comfort with going it alone, with CEO Josh Sapan often emphasizing the benefits of being a more focused company.
Financial experts often highlight, though, that in an age where entertainment giants are getting bigger to compete with deep-pocketed tech titans, smaller players with strong brands and content franchises — such as Lionsgate’s The Hunger Games and Starz; MGM’s Rocky and Bond; and AMC Networks’ AMC, streamer Shudder and The Walking Dead — make for attractive takeover targets for biggies on the hunt. And at least one or other company lacking major scale will be up for striking a deal, rather than battling giants, if the money is right, the argument goes.
Some experts even argue that tech giants like Amazon, Netflix and Apple could scoop up smaller entertainment firms struggling on their own as they are hungry for popular content brands that would beef up their libraries.
The $43 billion WarnerMedia spinoff plan is “a watershed ‘horizontal’ merger that will likely reshape the media ecosystem and competitive landscape,” CFRA Research analyst Tuna Amobi says. And it is “motivated by the quest for additional scale for both companies’ nascent streaming offerings (HBO Max and discovery+) amid the escalating streaming wars versus Netflix, Hulu, Amazon Prime Video, Disney+ etc.”
With that in mind, it was no surprise that Wells Fargo analyst Steven Cahall was among those starting the week by asking whether the likes of Comcast and ViacomCBS may be “suddenly feeling lonely.” Like some of his peers, he had suggested on March 17 a merger of WarnerMedia with Comcast’s NBCUniversal-plus-Sky, noting, “investor preferences for more-focused business models, and the industrial logic that arises from combining two big content libraries to better compete with Netflix and Disney.”
On Monday, Cahall wrote: “Discovery+WarnerMedia doesn’t close the door to further deals, but it does cast doubt on a transaction with NBCU.” He argued that the deal could leave “Comcast potentially looking for a dance partner, and ViacomCBS could be dancing on their own too.”
LightShedPartners analyst Richard Greenfield earlier this year had also called for a merger of NBCUniversal and WarnerMedia, but after the Discovery deal announcement, he wondered in a report: “Will Comcast follow AT&T’s lead and spin off NBCU and merge with another media company? Beyond ViacomCBS (where the CBS network and stations are clear regulatory problems), there is no obvious list of partners.”
Peter Csathy, chairman of advisory firm CreaTV Media, argues that it’s the technology or streaming giants, such as Amazon, Netflix and Apple, that may aim to pick up entertainment players in need of a bigger parent. “MGM, owned by private equity, and Lionsgate are ripe, because they own valuable content franchises,” he says.
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