All Hail the King – Recent M&As Prove the Importance of Content

Content is king…

Over the past few weeks, there have been major merger and acquisition announcements from the media industry’s biggest players. Moreover, all of them have something in common, content and content consolidation.
It started with Discovery Communications’ acquisition of Scripps Networks for $11.9 Billion, forming a literal TV content giant. Now Discovery will add Scripps’ HGTV, the Food Network, Travel Channel, the Cooking Channel, USA Today, and more under its content umbrella alongside Discovery Channel and its list of related channels, Animal Planet, TLC, OWN, and Eurosport. Discovery’s plan is to launch its own online streaming service consisting of Discovery content and the content and brands it acquired from Scripps.
Just a week after news broke on Discovery’s Scripps acquisition, streaming service Netflix announced its first ever acquisition, Millarworld, a comic book publishing company owned by creator, writer, and pop-culture influencer Mark Millar. Some of Millarworld’s original content has already been adapted to the big screen, including the Kingsman: The Secret Service, Kick-Ass, and Wanted movie franchises, which collectively brought in over a billion dollars at the box-office. Mark Millar is also the creator and writer behind a large part of Marvel and DC Comics’ modern source material, and his work is heavily referenced in their movie and TV adaptations.
Up until now, the majority of Netflix’s original content was acquired or licensed. With Millarworld, and Mark Millar himself, Netflix plans to produce true Netflix Originals, made by them, for them.
A day after the Netflix-Millarworld news, during an earnings call, Disney announced it would be canceling its distribution deal with Netflix in 2019 with plans of launching their own direct-to-viewer service. This means that in 2019 Netflix will lose its exclusive streaming rights to Disney, Pixar, Marvel, and Star Wars movies, each one a multibillion-dollar franchise, and some of the service’s most viewed content.
In addition to canceling their Netflix deal, Disney is currently in the process of acquiring a majority stake in BAM Tech, the technology unit which spun off from MLB Advanced Media, for more than $1 billion dollars. With BAM Tech, Disney is planning to launch a sports streaming service in early 2018 for its ESPN brand, which will feature close to 10,000 sporting events a year, and content from the MLB, NHL, MLS, collegiate sports, and tennis’ Grand Slam events.

So, what’s going on?

Up until recently, most of the content M&As were coming from tech companies and service providers. Now, we see multibillion dollar acquisition deals for content and content consolidation. Publishers want more content, and the media companies want to regain exclusivity over their licensed properties and go directly to the consumer.
Disney is a great example of a company that has always understood the importance of content, while quickly snatching up studios and franchises, like Pixar, Lucasfilm, and Marvel Studios, to not only secure their place at the box office but to add to its already long list of IPs. Even Netflix, whose content aggregation, licensing deals, funded motion pictures, and original programming has been praised, is looking to own their own exclusive IPs with Millarworld.
Disney’s acquisition of BAM Tech and their upcoming ESPN service also shows the importance of “niche services”, offering a certain type of content to cater to a certain type of viewer – like sports, kids content, or special interests like hunting, cars, and even horse-racing. Sports channels and televised sporting events are still a big reason why many traditional pay TV viewers have yet to cut the cord.
Also, as more services skip the middleman and go direct-to-consumer, the content offered is becoming more important than ever, serving as a major factor for subscribers when choosing a TV or streaming service. In a recent survey by 451 Research, 33% of streaming subscribers decided on a platform based on the content offered. Moreover, 50% of subscribers chose the movies offered as their top reason for settling on a service.
As seen from the recent activity, it’s quite clear and simple:

Give your viewers the content they want to watch, and they will stick with you.

Netflix is investing heavily in content it hopes its subscribers will want to watch, Discovery is expanding the content it knows its viewers want to watch, and Disney is reclaiming its market-leading content for its own use.
Going forward, we anticipate even more consolidation throughout the industry as more media companies, content creators, digital publishers, and production studios merge to create content giants, offering more content options directly to consumers.

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