The media industry closes out 2024 in a landscape very different than a year ago and perhaps looking up as the biggest players begin to manage the confounding decline of linear television. Paramount Global’s sale to Skydance Media, followed by Comcast‘s spin-off of its cable networks into a new company, both still to close, are transformational.
Silver Lake taking Endeavor private, Sony Pictures Entertainment buying the Alamo Drafthouse theater chain, and Disney investing $1.5 billion for an equity stake in Epic Games, are notable. NFL owners voted to let institutional investors buy minority stakes in teams. Omnicom is acquiring Interpublic, reshaping the advertising landscape. International highlights include Mediawan’s acquisition of Leonine Studios.
No one anticipates another storied studio will change hands in 2025. What Wall Streeters and industry players do expect is movement around media’s “free radicals” — a chemistry term for unstable atoms that Liberty Media founder John Malone applied to the industry years ago. That’s Lionsgate Studios and Starz, which are splitting into stand-alone companies, and AMC Networks. Streaming partnerships will accelerate. Cable networks will consolidate.
Comcast fired the starting gun last month with plans to spin off most of NBCUniversal’s cable networks (USA Network, CNBC, MSNBC, Oxygen, E!, Syfy and Golf Channel) with digital assets like Fandango and Rotten Tomatoes into a new company known for now as SpinCo with $7 billion in annual revenue to “play offense in a changing media landscape,” according to Comcast president Mike Cavanagh. SpinCo is seen as a buyer of other networks. “We see a real opportunity to invest and build additional scale,” said NBCU’s Mark Lazarus, incoming CEO of the new entity.
Days later, Warner Bros Discovery announced a corporate restructuring under two new operating divisions, Global Linear Networks and Streaming & Studios. That’s seen as a first step towards actual separation of the businesses and WBD cited increased “optionality to pursue further value creation opportunities for both divisions in an evolving media landscape.” The company is seen is as a seller of cable networks.
“The explicit separation” of networks from streaming and studios mirrors Comcast’s recent spinoff announcement, said Doug Creutz of TD Cowen, noting WBD’s emphasis on strategic flexibility and shareholder value creation. The new structure “could facilitate various scenarios, from a full spinoff of the linear networks to a potential combination with other media assets.”
Private equity, emboldened by lower interest rates, might be a buyer of cable assets at the right price. “This is the classic type of business for private equity. A business that throws off strong free cash flow. That’s not growing. You can do some mergers, take cost out of it, and generate nice free cash flow,” says Alan Gould of Loop Media.
While it’s not clear if or how cable consolidation will play out, the stocks have moved higher because it’s movement, it opens possibilities, and it feel for the first time like there’s the outline of a plan.
Overall, “linear declines are being managed better”, says David Joyce of Seaport Global. He applauded WBD’s recent distribution deals with Comcast and Charter on terms that did not crush TNT for losing the NBA as Wall Street had feared, and even credited the two distributors with “stepping up to support the overall industry.”
Cleaning house, WBD reported a massive write-down of its linear networks in the second quarter after losing that longtime NBA rights deal.
Paramount also took a huge one-time charge to write down value of its linear business ahead of the sale to Skydance. That deal announced in June is conceptually huge, a smaller player buying a legacy Hollywood studio and television network, promising a new convergence of tech and media in concert with software giant Oracle, which is co-founded and run by Ellison’s father Larry Ellison, Skydance’s biggest investor. The $8 billion transaction will see Skydance with RedBird Capital buy out Shari Redstone’s controlling stake in Paramount, which will continue as a public company. The deal is expected to close in the first half of 2025.
Mixed Signals For Deals
That said, incoming FCC chairman Brendan Carr indicated that regulators will be giving Skydance-Paramount a closer look. Donald Trump happens to be suing CBS over how 60 Minutes handled an interview with Kamala Harris, and, generally, the president elect does not enjoy the news media. Has threatened to revoke broadcast licenses and jail journalists and just won a $15 million settlement from ABC. Legal targets also include the board of the Pulitzer Prize, publisher Simon & Schuster and the Des Moines Register.
“I’m doing this not because I want to. I’m doing this because I feel I have an obligation to,” Trump said at a recent press conference.
There are legal constraints as to what the FCC can and can’t do but also a question of just how much big media will benefit from a more lenient deal climate and the deregulation expected from the incoming administration.
“We do note that Trump’s first administration (unsuccessfully) opposed” CNN parent Time Warner’s sale to AT&T, says TD Cowen’s Creutz. “More recently incoming FCC chairman Brendan Carr made comments suggesting that the perception of bias at CBS could impact their review of the impending Paramount-Skydance transaction.”
And, “You can say scale will help you. I don’t know if the government lets it through or not,” he said of cable consolidation.
A merger of Hollywood studios is a whole other level of problematic, Wall Streeters say.
“Having gone through two strikes last year, I think there would be more of an industry backlash to consolidation of studios than there would be a regulatory backlash,” says Joyce. “Putting together Warner Bros and Universal would not fly. Lionsgate and Warner Bros would be fine, Lionsgate and Paramount would be fine. While there has been antitrust pushback on studio mergers in the past, I think that at this point, and with the new administration, it would be much more of an industry pushback.”
Current FTC chief Lina Khan and DOJ antitrust chief Jonathan Kanter “shined a really big light on the fact that when you consolidate industries there are lots of negative byproducts. Hollywood has some pretty powerful unions that can make a lot of noise. People with big checkbooks who can make a lot of noise,” he said. When Sony briefly tried to buy Paramount, Ari Emanuel and James Cameron came out publicly in support of a Skydance deal, reflecting understandable industry angst over two more major studios combining after Disney bought Fox in 2019.
Khan has populist Republican fans including J.D. Vance, but has generally been excoriated by CEOs and big investors for the Federal Trade Commission’s aggressive stance on deals. Trump has selected Republican FTC commissioner Andrew Ferguson to replace Khan, and Gail Slater to head the Justice Department’s antitrust division.
The expectation is for “a much more regulatory-friendly environment,” said Bart Spiegel, PwC’s global media and entertainment deals leader. Many potential transactions have been sidelined because companies didn’t want to go through the hassle and expense of trying given the risk of being shot down.
“There’s a significant amount of pent-up demand” and a lot of money sitting on the sidelines. M&A in 2025, he said, should see deals and partnerships, joint ventures and “creative ways to collaborate with others in the industry.”
Asked on WBD’s latest earnings call about M&A under the new Trump administration, WBD CEOP David Zaslav said: “It’s too early to tell, but it may offer a pace of change and an opportunity for consolidation that may be quite different, that would provide a real positive and accelerated impact on this industry that’s needed … If the best content is going to win, there needs to be some consolidation in order to have these businesses be stronger and have a better consumer experience.”
Streaming’s Value Proposition
Consumer experience in streaming in particular needs improve, some say, because even as DTC steadily erodes linear television, its own consumer value proposition is shrinking.
“Prices are going up, advertising time is going up, spending on content is not going up. And you have more and more content stuck behind these walled gardens,” says one Wall Streeter. “The product is getting worse every day for consumers and that’s not a great long-term path for growth.”
“Consumers do not want five or six services,” says Loop Capital’s Gould. “There has to be consolidation. Netflix is one. Disney two. Amazon is not going away. We don’t know what Apple is going to do, how much they will spend. But consolidation between Peacock, Paramount+ and Max, at a bare minimum. You need two of the three, or maybe, it could be argued, one of three.”
Bundling, which helps reduce churn, has accelerated. Disney bundles Disney+ and Hulu with or without ESPN+. There’s also a Disney+, Hulu and Max bundle. Distributors offer them — like Comcast Xfinity’s streaming bundle of Peacock, Netflix and Apple TV+ for subscribers. One attempt to rationalize sports viewing, Venu, a streaming sports joint venture of Disney, Fox and WBD and meant to launch this fall, was blocked in a lawsuit by rival Fubo and is heading to trial.
Streamers have been cutting losses and, in some cases, turning a profit. Making money is better than losing money, notes one analyst, but that doesn’t necessarily equate to generating meaningful economic value. Price hikes have become a key driver of growth. Some analysts think it’s possible the rate of linear decline may slow as streaming becomes increasingly expensive.
Low hanging fruit for deals in the new year may be local broadcasting. Station CEOs like Perry Sook, head of the nation’s largest station group, Nexstar, are upbeat that the 39% ownership cap will be eliminated. The cap limits the reach of any one broadcaster to 39% of the U.S. Station owners also hope for a easing of the broadcast duopoly rule, a reg limiting the number of stations a company can own in a single market.
“YouTube has a billion hours of video watched a day. That just dwarfs all the traditional media guys, which is why you really have to have consolidation,” says Gould. “I could certainly see Nexstar doing some deals. It’s ridiculous to have a 39% cap when Facebook has 2 billion people around the world to advertise to.”
Investors also have an eye on Fox Corp., which continues to have great success doubling down on linear news and sports. Given the march of streaming, however, some wonder if Fox has a Plan B. Others lament recent family turmoil. Patriarch Rupert Murdoch and his oldest son, Fox CEO Lachlan Murdoch, tried, so far unsuccessfully, to disenfranchise Lachlan’s three other siblings, Elisabeth, James and Prudence, from control of the family business. A blind trust set up years ago passes shared control to Murdoch’s four oldest children. Rupert lost a bid in Nevada probate court to revoke the trust with sharp words from the judge, but is appealing. The idea is that Lachlan’s shared control with more liberal leaning siblings could result in his ouster and impact the direction of hugely popular cash cow Fox News.
“I’ve got to assume that if the three siblings were not teamed up against Lachlan before, they are now,” says one Wall Streeter.
Key 2024 Deals
Here are some other combinations announced in the U.S. and abroad in 2024, with deal value if available.
Nov. 12 – Fortress Investment Group acquires Curzon. Fortress was a creditor of Curzon’s previous owner Landmark Theatres and acquired the arthouse theater chain, distributor and Curzon Home Cinema streamer at a foreclosure auction with a bid of $5 million.
Nov. 11 – Management buyout of Endeavor’s OpenBet and IMG Arena for $450 million. Backed by Ariel Emanuel with participation from executives of OpenBet including CEO Jordan Levin.
July 5 – Mediawan and Leonine Studios acquire 51% of UK drama producer Drama Republic.
June 20 – Canal+ released the last instalment of its $300 million investment in Viu to increase its stake in the streaming service — which serves 16 markets across Asia, and other territories — to 36.8%. Retains the right to boost its stake ot 51%.
June 12 – Sony Pictures acquires Alamo Drafthouse Cinema for an estimated $200 million.
April 28 – Mediawan buys Leonine Studios in all-stock deal, forming a major indie European studio. Mediawan has owned a 25% stake in the business since 2020. Both are backed by KKR
March 25 – Freemantle acquires Asacha Media Group from founding partners, managers and funds managed by Oaktree Investment.
Feb. 29 – BBC Studios acquires ITV‘s 50% stake in their joint venture streamer BritBox International for £255M ($322M).
Feb. 8 – Freemantle takes majority stake in Asian indie producer Beach House Pictures.