Is TV Achieving Digital Transformation Through M&A and Investment?

By: Jacob Carlson

The decline of traditional television has been predicted for years. The threat of YouTube and Netflix, cord-cutters and cord-nevers, and the overall emergence of mobile content consumption have caused hand-wringing throughout the industry for quite a while. In previous years there were trends and forecasts suggesting that the television industry was in jeopardy, but it appears that 2016 may be the year where TV finally faces that challenge head-on.

Traditional pay-TV subscriptions are down by almost a half million in Q3, which is about what happened in the same time last year. ESPN, the cash cow of pay-TV subscriptions, lost 621,000 subscribers for November alone according to Nielsen data. Even the NFL ratings are down across the board for Thursday, Sunday, and Monday Night Football; MNF is down 24% year over year. Consumers are moving away from traditional TV in ways that are now having an economic impact on the industry. However, the major networks and studios have not been sitting idly by. They have been making deals throughout the year to both consolidate power and diversify their interests in a way that keeps them relevant through the digital transformation.

AT&T’s $85 billion acquisition of Time Warner has major ramifications in the television industry. It allows AT&T and DirecTV to become more vertically integrated by owning a stack of television content creators and distributors. It also makes them more competitive with Verizon and Comcast, which have both taken a similar approach to the direction of the industry.

Until recently one of the biggest transactions in the TV world was Comcast acquiring DreamWorks Animation for $3.8 billion. This deal not only brought Comcast a feature animated film studio, it also included AwesomenessTV. Now NBCU can leverage content from a host of producers and distribution platforms to attract audiences that traditionally may not consume TV content on TV. Comcast also acquired the sports-data tech company OneTwoSee, in an effort to enhance its X1 offering for live sports content, which is still one of the biggest drivers of TV advertising revenue.

In addition to consolidation, diversification of core business has been a key driver of deals in 2016. NBCU’s push into digital publishing has continued with $200 million of additional investment into BuzzFeed (on top of the $200 million they invested last year). After their $200 million investment into Vox Media last year, NBCU is now realizing some benefits of that transaction with a new offering called Concert that allows advertisers to reach premium ad inventory across Vox’s eight digital publishers and all of NBCU’s digital properties.

Not to be left out in the cold, Discovery Communications recently invested $100 million into Group Nine Media. This move is mutually beneficial, leveraging Group Nine’s content across Discovery’s platforms, including traditional linear TV, as well as giving Discovery a stronger foothold in the digital media space.

Turner, Univision and AMC Networks have also put their money into the digital space in 2016, with Turner leading a $15 million round in Mashable and leading a $45 million round in Refinery29. Univision acquired the remnants of Gawker Media for $135 million, giving them an asset to reach millennials and other non-TV audiences who look to digital for content. AMC Networks recently acquired a minority stake in the online comedy production and distribution company Funny or Die (FoD). This deal allows FoD and AMC’s independent-focused channel IFC to cross collaborate and bring successful digital-first projects to traditional television.

Time Warner further committed to the digital distribution model with a 10% investment into Hulu for a reported $538 million. With their content already moving towards a digital model via HBO NOW and WB’s acquisition of DramaFever and Machinima, the acquisition fits their continued strategy of meeting their audience where they are consuming content. With the upcoming AT&T integration, Time Warner could find a home with a like-minded partner, as the upcoming DirecTV Now OTT plan will be yet another place for Time Warner content to live.

Disney has made a sizable bet on the future of digital distribution with a $1 billion investment for 33% of MLB’s BAMTech. In addition to the tech, Disney invested in digital content creator and distributor Vice Media at the end of 2015, hoping to reach a millennial audience that is loyal to the Vice brand.

One of the interesting new areas that traditional TV companies are investing in is virtual reality (VR). Disney led the $65 million round in Jaunt, while live-streaming VR company NextVR has received over $115 million in funding from Time Warner and Comcast, among others.

With all of the activity in 2016, it’s clear that traditional TV operators realize that they need to be directly involved in the new digital distribution and content opportunities. Since the digital ecosystem develops and moves so quickly, it makes sense that the TV industry is using their significant capital to buy a seat on the train. As 2016 winds down, it appears that 2017 will allow consumers more options than ever before to consume content in a way that fits their preferences.



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