What the billionaire executives are saying from the Allen & Co. conference about the deal-making market and future industry moves
“We’re always open-minded on the M&A front as both buyers and sellers if it makes sense”Fries were told CNBC. “Most of our effort is going into the markets we’re in. So in the U.K., for example, we’re the largest mobile company, we’re the most the most important broadband company I think. There might be opportunities in that market to continue to rationalize whether its fiber, content or fixed.”
Fries is also analyzing the tea leaves in the entertainment industry. Many expect more consolidation after years of streaming expansion and media proliferation. Wall Street’s pendulum swing against the Netflix model and an increased scrutiny being placed on content budgets has Hollywood looking over its shoulder.
“I think so,”When asked if he expected additional consolidation in the near-term, Fries replied. “I think you might see some content assets, not necessarily ours or with us or by us. But studios have inherent value and as Netflix or others look to stay local, we own interest in ITV and All3Media, so we have some studio assets that may be interesting.”
Who knows — maybe we might all look back on this year’s Sun Valley conference as the nexus point of the industry’s next dramatic shake-up.
“I do feel like there’s going to come a point where people are going to stop adding subscriptions and companies may possibly close down some of their subscriptions,”According to a national media buyer, “There are too many over-the-top services out there.”
Here are some other lessons from the early days of the billionaire summer camp.
David Zaslav wants quality, not quantity
HBO Max, a newly formed parent company Warner Bros., halted production in selected European countries earlier this week. This was financially motivated. Discovery targets cost savings of $3Billion Perhaps we shouldn’t be surprised given WBD CEO David Zaslav’s comments Tuesday at Sun Valley.
Discussion of the current “turmoil”Zaslav acknowledged that the industry creates “a lot of opportunity,” but he didn’t sound like a man prepared to expand his company’s programming portfolio.
“Warner Bros. Discovery’s got great, quality content,”He told the story Variety. “So I think the world has changed. And it’s not about how much, it’s about how good. And so we’re pretty excited about our new company and getting to see everybody in this beautiful setting. It’s going to be a lot of fun.”
Zaslav has already moved to pull many of WBD’s basic cable channels, such as TBS and TNT, out of scripted content. The company is currently spending approximately $33 billion on content this year, the leadership has said the company doesn’t want to win the “spending wars.”
This sentiment is expected to extend to WBD’s streaming efforts with Discovery+ and HBO Max set to be merged into one service at some point in the future. “We’ll talk about how we’re going to do it, and when, soon,”Zaslav teased.
Media returns to linear TV
As media companies reoriented around streaming in recent years to chase the elusive Netflix stock price multiple, linear television became the entertainment industry’s forgotten child. Dissed and dismissed as a declining business despite billions in quarterly revenue, pay TV has suddenly made a roaring comeback as Wall Street’s confidence in the streaming model evaporates.
As such, perhaps we shouldn’t be too shocked that Disney CEO Bob Chapek has apparently reversed course on his desire to spin off ESPN, according to Puck News. Disney didn’t immediately respond to ’s request for comment.
The money-making draw card of traditional TV is live sports and ESPN has a lot of games. However, even though linear TV’s proven revenue is a source of income for media companies, streaming can complicate matters.
“Brands that typically pull their advertising during a recession are the ones that often have a harder time when they come back,”According to the national media buyer “Brands that stay the course, even if at low levels during a time where might is tight, tend to excel because they remain out in the marketplace building awareness and building their brand equity.”
Advertising money is often cut back by advertisers during difficult economic times. This has a trickle down effect on the entire entertainment industry. Sports economy hit hardThe pandemic’s first year saw ancillary revenue shrink and TV ratings drop. Should America enter another recession, the side effects will reverberate throughout Hollywood and that won’t just be a Disney-ESPN problem.
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