Distributors of pay-television services have been pairing up in megaSHYmergers. Now, the companies that make the shows may not be far behind.
After years of pursuing a cautious strategy that emphasized returning capital to shareholders over making splashy acquisitions, U.S. media companies are priming themselves for what many industry executives believe will be a major round of consolidation.
One possible trigger: Their biggest customers, the cable and satellite-TV providers that pay to license their TV channels, are gaining scale through their own deals. Cable giant Comcast Corp.(CMCSA) is seeking government clearance to buy Time Warner Cable Inc.(TWC) while DirecTV(DTV) is joining up with AT&T Inc.(T)
The behemoths that result from those two deals, which combined will have more than half of all pay-TV subscribers, could have increased leverage when negotiating for programming and threaten the subscription revenue U.S. media companies depend on.
Most susceptible to being squeezed, analysts and executives say, are smaller TV channel owners such as AMC Networks(AMCX), home of "The Walking Dead," and Food Network owner Scripps Networks Interactive. Selling to bigger competitors could help these companies beat back the threat.
Another potential acquisition target: Spanish-language broadcaster Univision Communications, which has sharply criticized the Comcast(CMCSA) merger, saying it would give the cable giant "staggering influence over Hispanic consumers." Univision's owners, mostly private-equity firms along with billionaire Haim Saban, have had preliminary discussions with big media companies including CBS Corp.(CBS) and Time Warner Inc.(TWX), The Wall Street Journal reported on Thursday night.
The most likely acquirers include big media conglomerates like 21st Century Fox Inc.(FOXA) and Walt Disney Co., whose size and control of popular sports, news and broadcast programming give them extra leverage over pay-TV providers.
9/29/2014 10:00 EDT - Lions Gate (LGF) shares up 1.8%, earlier up more than 3%, perhaps as investors consider it a buyout target following reports that SoftBank is talking to DreamWorks Animation (DWA) about a possible buyout. Analysts had been looking for months at Vancouver-based (LGF) as a potential tax inversion target for a US company. Still Don Bilson, head of event-driven research at Gordon Haskett Research Advisors, who has often pointed to LGF as a target in his newsletter and did so again this morning, cited Netflix(NFLX) as a potential buyer. Mr. Bilson said that one issue with a possible takeover is the company's chairman and 37% owner Mark Rachesky. "We figure Rachesky would have to be blown away by an offer."
DreamWorks Animation in talks to sell to Japan's SoftBank
DreamWorks Animation, the studio behind the "Shrek," "Kung #$%$ Panda" and "Madagascar" movies, is in talks to sell the company to Japanese telecommunications firm SoftBank Corp., according to a person familiar with the talks.
Jeffrey Katzenberg, chief executive of the Glendale studio, has been in discussions to sell the company he launched twenty years ago to SoftBank, which owns Sprint Corp. and recently dropped a bid to acquire T-Mobile.
DreamWorks Animation CEO Jeffrey Katzenberg talks about advancements in animation during the International Consumer Electronics Show in Las Vegas in January. (Julie Jacobson / Associated Press)
The DreamWorks board held a meeting Thursday to consider an offer by SoftBank to buy DreamWorks for $32 a share, well above the company's current share price, which closed at $22.36 on Friday, according to the person, who was not authorized to discuss the talks.
A spokeswoman for DreamWorks Animation said she could not comment on "rumors and speculation."
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Katzenberg considered selling the company two years ago but withdrew those plans to focus on building the business into a broad-based studio with interests in television, theme parks, live entertainment and digital media. Last year, it bought YouTube teen network AwesomenessTV for $33 million in cash.
In an interview with The Times this summer, Katzenberg said he was no longer looking to sell the studio but focusing on growing its businesses.
The talks with SoftBank come as DreamWorks Animation has been attempting to diversify its operations after a string of box-office misfires over the last two years that rattled investors and caused a sharp decline in the company's share price.
DreamWorks Animation appoints new chief financial officer
DreamWorks Animation appoints new chief financial officer
Earlier this year, the company took a $57-million write-down for "Mr. Peabody & Sherman," the third write-down in less than two years for the studio. After its 2013 summer hit "The Croods," DreamWorks took a $13.5-million charge this year on its snail comedy "Turbo." And last year, DreamWorks reported an $87-million write-down for "Rise of the Guardians." The flop was one reason DreamWorks laid off about 350 employees.
The company scored a hit with its latest movie, "How to Train Your Dragon 2," which did big business in China.
What da heck does "charge" and "write down" mean? Use normal terms LAT please!
AT 10:38 AM SEPTEMBER 28, 2014
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DreamWorks Animation was founded twenty years ago as part of the studio created by Steven Spielberg, David Geffen and Jeffrey Katzenberg. The company was spun off as a separate public company in 2004.
Since then, the company has evolved from a fledgling studio into a $700-million-a-year multimedia powerhouse and one of the industry's leading animation companies.
But Katzenberg has come under growing pressure to improve DreamWorks' performance as it faces growing competition from rival studios. The company posted a $15.4 million loss in the second quarter.
SoftBank has been on the lookout for acquisitions. Last year, the company made an unsuccessful attempt to buy Universal Music Group from Vivendi. SoftBank recently drew attention for its $20-million investment in Chinese Internet giant Alibaba.
SoftBank owns companies or pieces of them in wireless, broadband, Internet, e-commerce and other tech-economy sectors, including a majority share in U.S. cellphone carrier Sprint.
Recently, SoftBank hired Nikesh Arora, a business development hotshot who spent ten years at Google, to engineer new deals for SoftBank. If the DreamWorks Animation deal pans out, SoftBank will have more content to stream over its pipelines.
The deal talks were first reported by the Hollywood Reporter.
Updated Sept. 28, 2014 6:38 p.m. ET
SoftBank Corp. 9984.TO -0.81% is in talks to buy or otherwise link up with DreamWorks Animation SKG Inc., DWA +0.58% people familiar with the negotiations said, a deal that could help the Japanese company and the Hollywood studio as they seek new ways to compete with rivals world-wide.
Coming nearly two months after SoftBank dropped a possible bid for T-Mobile US Inc., TMUS +1.44% a DreamWorks Animation deal could give the conglomerate's Sprint Corp. S +0.47% unit another way to try to challenge top U.S. mobile carriers AT&T Inc. T +0.57% and Verizon Communications Inc. VZ +0.32%
Rather than directly expand his telecommunications network, SoftBank Chief Executive Masayoshi Son now appears to be focusing more on acquiring content creators, mostly videogame studios so far, whose products can be used to woo potential mobile subscribers.
Mr. Son early last month decided against bidding for T-Mobile, the fourth-largest U.S. cellular operator, and combining it with No. 3 Sprint, amid antitrust concerns in Washington.
SoftBank is well positioned for acquisitions in part because of billions of dollars in paper gains from the recent initial public offering of Chinese Internet company Alibaba Group Holding Ltd., of which SoftBank owns 32%.
MORE MEDIA MERGING: Consolidation in media is heating up. Another big TV station merger was announced late Wednesday, the WSJ reports, between EW Scripps and Journal Communications. Both companies are perhaps best known as newspaper publishers but in truth, their broadcasting businesses are bigger. In the deal, the broadcasting assets and newspapers will be split into separate companies although Scripps’ shareholders will end up with a majority stake in each. Separating will make further acquisitions easier from a regulatory standpoint … Meanwhile, AMC Networks is in talks to buy a minority stake in BBC America, Bloomberg and WSJ reported. Under the deal being discussed, AMC would represent BBC America in distribution discussions with pay TV operators, giving BBC America the chance to boost its affiliate fee and increase its distribution. AMC isn’t exactly a major player but its flagship channel is known for hot shows, which gives it some leverage.
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After Disney purchased multichannel network Maker Studios, monthly viewers more than doubled to nine billion, explains Jay Rasulo, Disney chief financial officer. He discusses Disney's acquisition strategy.
By Grant Brunner on August 25, 2014 at 3:44 pm0 Comments
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After weeks of uncertainty and user revolt, the story surrounding Twitch just got more bizarre. Reports are coming in today claiming that Amazon will be acquiring the popular video streaming service, and that only adds to the confusion of the last month or so. This is an unexpected development, but considering other recent acquisitions, buying Twitch makes a lot of sense for Amazon.
Last month, it was widely reported that Google had purchased Twitch for upwards of one billion dollars. Not long after, Twitch began rolling out a number of unpopular changes including the introduction of an automated audio matching algorithm intended to silence copyrighted music on archived videos. In the wake of these sweeping changes, some people started questioning whether or not the Google acquisition actually happened.
Amazon Fire TV Now, the Wall Street Journal is reporting that Amazon — not Google — will be acquiring Twitch Interactive for more than one billion dollars. The WSJ’s source claims that the Google deal went sideways over the last few weeks, so the original reports weren’t entirely unfounded. It seems that Google did plan on buying Twitch, but negotiations soured before contracts were signed.
So, why would this online retailer want to get into the video game live-streaming business? Simply put, it thrusts Amazon’s gaming products into the spotlight. Twitch is wildly popular among the gaming community, and controlling Twitch gives Amazon the legitimacy it seems to so desperately want.
Not only does Amazon sell a (half-hearted) game console, but it’s made a number of strategic gaming acquisitions over the last few months as well. Double Helix, the studio best-known for the 2013 Killer Instinct reboot on the Xbox One, was snatched up in February. Kim Swift (Portal) and Clint Hocking (Far Cry 2, Splinter Cell) quickly joined Amazon Game Studios as well.
SAN FRANCISCO/LOS ANGELES, Aug 26 (Reuters) - Amazon Inc(AMZN) tracked Twitch's evolution from scrappy guerrilla startup to one of the Internet's hottest media properties. On Monday, it announced a near-$1 billion acquisition to get into one of the fastest-growing online arenas: live-streaming.
Amazon's (AMZN) $970 million bet - its largest ever - underscores how a loyal and fast-growing following for live-streaming has grabbed the attention of big brands. Some believe live and interactive streaming, in which Twitch is a pioneer, is the new frontier in online video.
Bessemer Ventures' Ethan Kurzweil admitted on Monday he got blank stares from people he described Twitch to initially. The San Francisco-based startup lets gamers livecast their play while responding to cheers, tips and random musings from online viewers in real time.
In three years, Twitch has become the fourth largest U.S. producer of peak Internet traffic, ahead of Facebook and Hulu, according to Bessemer, a backer.
"It's a captive audience and one that is loyal," said Adam Shlachter, head of media activation at marketing agency DigitasLBi. "Where you have like-minded people..all aggregated in one place, kind of holed up around the same thing and participating in the same experiences, that offers a really unique environment to target (ads) against."
Live-streaming draws a following partly because of its immediacy: fans message their favorite personalities and can evoke a response during livecasts. Twitch and other live-stream networks like Livestream also cater to niches, featuring content such as offbeat sports to videogames that mainstream outlets eschew.
Twitch had 55 million monthly viewers in July, up about 45 percent from a year earlier. That growth caught the attention of advertisers, who spotted the chance to reach younger viewers who watch less television.
Brands will spend $6 billion this year on digital video advertising in the United States, according to research firm eMarketer.
posted 2:35 am 8/15/2014
John Malone is buying a timeshare in Downton Abbey.
The media mogul's European cable operator Liberty Global(LBTYA) has acquired a 6.4% stake in ITV, the U.K.'s largest commercial broadcaster that also produced the hit British drama series. Liberty has paid British Sky Broadcasting GroupGBP481 million ($824 million) for the shares, but said it didn't intend to make an offer for the broadcaster. Yet the prospect it could later launch a full takeover sent ITV shares up 10% at one point Thursday.
At a time when U.S. media companies are eyeing bigger content deals, staking a claim on ITV looks smart for Liberty.
In some ways, this deal is a blast from the past. NTL, the cable operator now part of Liberty's Virgin Media, tried to buy ITV in 2006 only to be thwarted by BSkyB(BSYBF). Since then, the balance of power in media has shifted further away from distributors and toward content owners. Content costs are rising sharply and owning a broadcaster would strengthen Liberty's hand when negotiating access to others' programs. It would also give it differentiated content to repackage for its own pay-TV subscribers.
Sure, Liberty appears to have paid a full price for its foothold in ITV. The deal implies a valuation on ITV of 12.3 times last year's earnings before interest, tax, depreciation and amortization, a premium to other recent deals in the European broadcast and media sector on around nine times, notes Citigroup(C).
But ITV could still make a sound investment. ITV currently charges pay-TV operators like Virgin Media to carry some of its channels, like ITV2. However, regulations that prohibit ITV from charging retransmission fees on its largest channel ITV1 could change over the next couple of years, reckons Liberum Capital'sIan Whittaker.
For ITV, bigger retransmission fees, which fall straight to the bottom line, would also reduce its dependence on cyclical advertising revenue. That could make ITV a more comfortable investment for Lib
For ITV, bigger retransmission fees, which fall straight to the bottom line, would also reduce its dependence on cyclical advertising revenue. That could make ITV a more comfortable investment for Liberty, which depends on steadier, subscription-based cash flows. In the U.S. retransmission revenue is growing rapidly and could reach the equivalent of 23% of the projected $26 billion TV advertising market in 2018 compared with 1% in 2006, notes Liberum.
Of course, Liberty's statement that it doesn't intend to buy ITV prevents it from making a takeover offer for six months under U.K. rules. But Liberty's move could discourage potential interlopers at a time when U.K. content is in high demand: Viacom(VIA) this year bought the U.K.'s Channel 5 and Discovery Communications(DISCA) and Liberty snapped up Midsomer Murders-producer All3Media.
Liberty has a history of patiently accumulating stakes as a precursor to a full takeover. So ITV's shareholders are right to think the broadcaster may now be in play. And Liberty, at the very least, has bought itself time to see how the content world shakes out
From Business Insider:
21st Century Fox has put Time Warner in play.
According to Andrew Ross Sorkin, 21st Century Fox offered to pay $85 per share to buy Time Warner. At that price, the deal would be valued at $80 billion.
Why is 21st Century Fox interested in buying Time Warner?
It is likely related to Comcast's buying Time Warner Cable, AT&T buying DirecTV, and Sprint reportedly looking at buying T-Mobile.
Those companies control distribution. As they consolidate, they gain more power over the content companies — 21st Century Fox, Time Warner — that rely on them for distribution.
Here's how the TV business works: Fox News, which is owned by 21st Century Fox, gets almost $1 per subscriber from Comcast and other cable companies. That $1 causes tension between the two companies. For Fox, it's the lifeblood of its operations. It gets ad revenue, too, but the ad business comes and goes; subscriber fees don't. They remain steady and are steadily growing.
It's not just Fox News that gets those fees. All the channels these companies own — HBO, TBS, TNT, FX, Fox Sports One, etc. — get fees from companies. All the distributors — Comcast, Time Warner Cable, Verizon, etc. — fight to keep those fees low to protect their own profits.
With consolidation on the distribution side, those distribution companies have better leverage in any deal over subscriber fees. It's a lot easier for Comcast to say, "We're not paying you more for Fox News" if it has more control over the TV market. It can really choke out Fox News, and cut down on how many homes it's in. That cuts down on ad revenue and obviously eliminates the subscription fee altogether.
But if Rupert Murdoch, the CEO of 21st Century Fox, can go to Comcast and say, you better pay up for Fox News otherwise we're going to pull access to TNT, TBS, Fox Sports, and so on, he's going to be able to negotiate from a better position of strength.
This is a particularly important time for something like this.
Net Flix on Monday. cited the reception to the second season of its women's-prison comedy "Orange Is The New Black" as one of the main reasons for its strong second-quarter results. In a letter to its shareholders, Netflix said the second season of "Orange", which debuted on June 6, "became the most watched series in every Netflix territory" during the first month that the season was available. Last week, "Orange" received 12 Emmy nominations for its first season, which debuted in 2013.
Analysts at B. Riley lifted their price target on shares of Lions Gate Entertainment Corp. (NYSE:LGF) to $40.00 in a research report issued to clients and investors on Monday. B. Riley’s target price would indicate a potential upside of 24.77% from the company’s current price.
LOS ANGELES (Reuters) - Rupert Murdoch jets into Idaho's Sun Valley next week for the year's most exclusive tech and media industry gathering, armed with both the money and the appetite for a major deal.
The 83-year-old Twenty-First Century Fox Inc chief executive officer, a regular at investment bank Allen & Co's annual gathering, is in the midst of a deal that would give Fox the firepower to buy a content company.
Fox's 39 percent-owned British Sky Broadcasting Group Plc is negotiating to buy Fox's Sky Italia and its Sky Deutschland subsidiary in a deal that could net Fox as much as $13 billion.
"He's got the capital, resources and credibility to do a deal," said Mark Boidman, managing director of investment bank Peter J. Solomon Company, who is not attending the conference. "He's in a good position to know what to go after and when to do it."
Sun Valley will be teeming with CEOs whose companies might fit the bill. Among expected attendees are Time Warner Inc CEO Jeff Bewkes and Viacom Inc CEO Philippe Dauman.
Murdoch's interest in Time Warner despite its $62 billion market value has been the subject of industry speculation. He still covets the owner of HBO, among other potential targets, according to a former News Corp employee told by executives recently about Murdoch's interest.
The source did not know if Murdoch had made an approach. Time Warner spokesman Keith Cocozza and Fox spokesman Nathaniel Brown declined to comment.
"I'm not sure he could afford it, but you never want to say that about Rupert Murdoch," said former Viacom President Frank Biondi, an Allen & Co regular who is not going this year.
Some of the highest-profile chieftains in media and technology, from Facebook Inc's Mark Zuckerberg to Apple Inc's Tim Cook, gather at Sun Valley each year.
The conference generated deal discussions in the past. Comcast Corp CEO Brian Roberts discussed NBC with General Electric Co CEO Jeff Immelt one year. Biondi says he began talks to sell Madison Square Garden to John Malone's Liberty Media Corp there, but the deal fell apart.
Murdoch will be accompanied by sons Lachlan and James. Earlier this year, the elder Murdoch elevated Lachlan to non-executive co-chairman and James to co-chief operating officer. James has been especially interested in acquisitions, said a former top executive at News Corp familiar with their thinking.
Murdoch will not be the only acquisition-minded executive in Sun Valley next week.
Discovery Communications Inc CEO David Zaslav, whose company in May bought control of European sports TV programmer Eurosport, will be there.
So will Liberty Global Plc CEO Mike Fries, whose company and Discovery are negotiating to buy a stake in Formula One racing.
Vivendi and LGF?
PARIS/LONDON, June 19 (Reuters) - If Vivendi was to draw up a personal ad to find its perfect partner it would read:
"Freshly divorced from telecoms, 160-year-old holding company seeks attractive media businesses to spark growth. Pitches welcome, contact major shareholder Vincent Bollore."
After selling three of its six businesses in the past year in a strategy overhaul, Vivendi(VIVEF), one of France's largest companies, has up to 10 billion euros ($13.6 billion) to remake itself depending on how much debt it is willing to take on.
People close to the company say Vivendi(VIVEF) is likely to target acquisitions in different areas to its French pay-television operator Canal Plus and Universal Music Group, which are already too big in their respective markets to expand further.
Bankers are honing pitches to buy U.S.-based TV companies like AMC, Starz, and Scripps Network Interactive, or a movie studio such as Lionsgate , said two of the people. If U.S. valuations are too high, Vivendi(VIVEF) could scoop up TV and movie producers in Europe or look to new areas such as live sports or concerts, said one of the people.
Vivendi (VIVEF) will also have to do something with its Brazilian broadband unit GVT, which does not fit with the new focus on media, the people said. This business, valued from 4.9 to 5.4 billion euros, could be sold or merged with local mobile player Telecom Italia's TIM. Vivendi(VIVEF) says GVT is not for sale.
Vivendi (VIVEF) has so far said nothing about its plans, despite being six months into an internal review led by future chief executive Arnaud de Puyfontaine, who joined from magazine group Hearst in January.
That is because Vincent Bollore, Vivendi's(VIVEF) second-largest shareholder with a 5 percent stake, will become the real boss once he takes over as board chairman at a June 24 shareholder meeting.
The 62 year-old tycoon, who built a family owned port and logistics business in Africa and raided blue-chip companies like ad agency Havas, has a reputation for playing his cards close to his chest. He has not even told Vivendi executives what he wants the company to do after pending asset sales are completed, said the two people.
As a result, Vivendi is not expected to move on deals until late this year or next, they said.
"We don't need ideas; we have lots of them," said one company insider.
"But no one really knows if Bollore wants to recenter the group around Canal Plus, sell off music, or do something else ... honestly the guy is a total mystery."
A Vivendi spokesman said the company was in no rush to do deals and would take time to consider its options.
Since declaring a "no taboo" era in spring 2012 aimed at reversing a share slump, Vivendi has sold its video games arm Activision Blizzard, Maroc Telecom and French telecom operator SFR.
Investors, who will get close to 5 billion euros in dividends and share buybacks by the end of next year, have been rewarded for their patience. Shares that were trading at 12 euros when the overhaul started have settled at 19 euros after hitting 21 euros in February, the highest level in three years.
Vivendi's three remaining businesses - Universal Music, GVT and Canal Plus - face relatively modest growth prospects and generate little cost savings by being kept together. JP Morgan sees sales at Universal and Canal Plus growing 1.7 percent on a compound annual basis from 2014 to 2016. GVT will grow a bigger 10 percent on a compound annual basis from 2014 to 2016, but does not yet generate cash.
"Vivendi must decide if it wants to forge a coherent media company with a real strategy or if it is content to be a holding company with a collection of assets," said Gunjan Dixit, an analyst at ratings agency Moody's.
Bernstein Research analyst Claudio Aspesi said the prudent course would be for Vivendi to buy companies to strengthen Universal and Canal Plus. "While the temptation will be to acquire flashier digital media businesses, the risk is real that Vivendi overpays for targets that bring few synergies," he said.
Although Universal's market share is too big in recorded music to grow further by acquisitions, it could branch out into complementary areas like merchandising or doing more with a Vivendi-owned ticketing business called Digitick. Expanding into concert promotion or live events would be a good way to bolster Universal, said a sector banker.
Canal Plus, France's biggest pay-TV operator, could add additional countries beyond the current ones of Poland, Vietnam and some of French-speaking Africa.
Canal Plus has seen subscribers defect to Al Jazeera-owned sports channel beIN Sports, and also faces new competition from Internet-based players like Netflix, which will launch in France this autumn. Further pressure could come if Rupert Murdoch finalises talks to combine his European TV interests in a single company led by Britain's BSkyB.
However there are a limited number of pay-TV targets for Vivendi- Mediaset Premium in Italy and Digiturk in Turkey are two - and little evidence that being in pay-TV in different countries generates cost savings since content rights are local.
"There is more value in acquiring a Middle Eastern satellite player like OSN, which is also present in North Africa, than a US-based pay TV specialist," another banker said.
"A takeover of OSN would bridge the gap with viewers in North Africa and offers higher-growth opportunities."
Bollore could well be tempted to look further afield in digital media.
One person who met Vivendi recently came away with the impression that the entrepreneur favoured a bold approach. "Vivendi will favour a multibillion acquisition that could transform its media business and give it access to the digital universe," said the person.
"Bollore's strategy is to look at a single transformational deal rather than a string of mid-market ones." ($1 = 0.7368 Euros)
you forgot to put the best part:
"Consolidation might not seem to have much positive impact in the short term, but could really benefit content and channels companies over time by providing negotiating scale and diversity of product," said Michael Morris, a media analyst at Guggenheim Securities.
Size isn't the only factor likely to drive deal-making. Some companies may be looking for more exposure to the areas of the business that are growing fastest, including TV production and licensing of programming to subscription video sites and international pay-TV channels. Among studios Lions Gate Entertainment, maker of "Mad Men" and "The Hunger Games" movie franchise, is seen as a potential target. Sony Corp.'s studio is also viewed as a possible target."
Sentiment: Strong Buy