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Big tech media takeovers are on the horizon – who’s next?

Lots of pain all around in this down market and in the midst of these tough economic times. But with pain comes opportunity, and the media and entertainment industry is no exception. Suddenly, offers that were out of reach became affordable. Many, in fact, become downright bargains. Meanwhile, Wall Street-beaten companies have become increasingly open (many even desperate) to at least actively explore (and ultimately consume) strategic alternatives with a cash-rich sugar daddy or mommy. All of this gives rise to fascinating speculation about who is next in this great media and entertainment chess game. (Note: I moderate a panel of M&A experts on this topic only at Wednesday at TheWrap’s “TheGrill” eventwhich features top M&A executives from four major industry players: LionTree, Moelis, Raine and Shamrock.)

Obvious buyers are those who are cash-rich. And Big Tech – which has transformed the media and entertainment industry in recent years – is our starting point. Even in these market conditions, Big Tech’s multibillion-dollar valuations, along with their individual tens-of-billion-dollar cash hordes, dwarf other potential buyers by an order of magnitude. The most cash-rich of them all is Apple (with a current market cap of almost $2.3 trillion and tens of billions in cash), so let’s start there and focus on the hyper-competitive world of streaming video. dominated by tech giants.

Apple generally does not buy companies. Apple’s stealth body prefers to innovate on its own. But even mighty Apple can’t do it all. Let’s not forget that Spotify was eating Apple’s lunch when digital downloads transitioned to the new dominant world of music streaming. It was then that Apple acquired Dr. Dre’s Beats for a whopping $3 billion. And watch Apple Music now. He catapulted to become Spotify’s biggest challenger. Belonging to the cross-promoting Apple family has its privileges, after all.

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And the same can be said for Apple TV+ at this point. Cupertino’s premium paid video streamer certainly scratches Apple’s strategic itch, providing highly effective marketing for Apple’s hardware products. The platform’s historic first Academy Award for Best Streaming Picture for “CODA” and multiple Emmys don’t hurt. But Apple is ambitious. So what about Apple doing for video what it did for music – buying its way to victory?

And in the streaming video clash of the titans, Netflix, of course, is the jackpot. Nothing comes close. And look-look. The once-seemingly invincible streaming innovator now trades at a valuation around 67% below its highs just a year ago (its current market cap is just over $100 billion, about 23 times less than that of Apple). Of course, there are obstacles – antitrust law enforcement being just one. But it’s a potential deal that’s definitely one to watch. After all, Netflix’s depressed valuation isn’t the only reason it’s ripe for acquisition. The streamer simply cannot stand the new rules of the game in the streaming video world for the long haul. With few content franchises, it has no choice but to continue to spend heavily on content – ​​and content alone is what it monetizes. Big Tech’s situation is very different. These massive players also spend a lot on content. But they can withstand those savings because their video services are just one cog in much larger, multi-faceted revenue machines. In other words, video streaming is a marketing means to an end.

And don’t forget about Amazon as a potential buyer. Or Google or Microsoft, for that matter (you can rule out Meta/Facebook at this point since Mark Zuckerberg is now directly in the antitrust crosshairs of the feds and humiliated by a valuation well below $400 billion). Netflix is ​​likely in Amazon’s direct line of sight for similar reasons to Apple’s. Marketing, pure and simple. Amazon, like Apple, uses content – ​​in this case premium video – to entice us to buy (and keep buying) Prime memberships and buy more products online. Amazon Prime Video helps over 200 million of us forget that we automatically pay well over $100 a year for Prime memberships. With its recent takeover of MGM, Amazon is in the streaming game to win it, and the company’s roughly $1.2 trillion market capitalization is about 12 times that of Netflix.

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And what about Google? He’s tried too many different flavors of paid premium video subscriptions to count and basically ditched that idea for his YouTube brand. So why fight when you can bite the bullet and buy yourself into the game? Google certainly has the means. Just like with Apple, money isn’t the issue (its market cap is roughly the same as Amazon’s). Antitrust could be a challenge, sure, but that’s not stopping an ambitious, cash-rich player from trying.

Meanwhile, sleepy giant Microsoft – second only to Apple in its market valuation (now at around $1.7 trillion) – has woken up to the power of content in a big way. The company bought leading games studio Activision for nearly $70 billion earlier this year. And its Xbox Game Pass is the market leader in subscription games. So why not sue Netflix for being the two-time streaming winner for games and video? Why stop there? Why not also buy the music leader Spotify for the trifecta? Spotify suffers from the same disease as Netflix: content-only monetization. And its burden can be even greater than that of Netflix because its content licensing costs are variable – the more success it has, the more that success costs.

But these “big four” tech giants don’t just want Netflix’s massive international reach and global brand. They are also looking for franchise content. And for that, they’ll have to go elsewhere, as Netflix offers few gems of IP franchise content (“Stranger Things” is probably the biggest on the platform). Content franchises are certainly a major motivation for mergers and acquisitions right now, because they come with instant brand recognition and embedded audiences — and can be reinvented over and over for decades. That’s why Amazon bought MGM.

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And for these reasons, despite its protests to the contrary, Warner Bros. Discovery is ripe for the picking at a market cap only about 30% of Netflix’s. Just think of Warner Bros. franchises. and HBO. That instant marketing star power would bring the future winner of Disney’s Magic Kingdom ever closer to mega-franchises like “Star Wars,” Pixar, and the Marvel Universe. Warner Bros. Discovery is MGM on steroids. While the CEO of Warner Bros. Discovery, David Zaslav, denies any interest in selling the company — he just proclaimed “We’re not for sale, absolutely not for sale” – I’ll channel my own inner Shakespeare: “I think you’re protesting too much.” All M&A targets say this to drive up their price. As a result, the company will eventually be bought out.

In a similar vein, it makes perfect sense for broadband-focused Comcast to shed its franchise-rich but much lower-margin NBCUniversal business. This part of Comcast’s business could be a bargain, given that the combined company now trades at a slightly larger market capitalization than Netflix, at around $130 billion. (Hey mega-shoppers, why not just combine NBCUniversal with Netflix to create a franchise-rich streaming media juggernaut?)

How about Disney – the franchise giant – in this studio roulette game? The company’s cash cheese is a mouse compared to the trappings of Big Tech. With a market capitalization hovering around $175 billion, its means are seven dwarfed by these green-rich giants. No competition. So he’s not a buyer. But could he be a salesman? If we haven’t learned anything else, we’ve learned to never say never. Disney owns Pixar. Steve Jobs gave birth to Pixar. Apple and Disney therefore share the same DNA. I’m just saying…

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In terms of smaller, but still strategic, content- and franchise-focused deals, prestige studios A24, Anonymous Content, and Blumhouse should be on everyone’s bucket list. To be clear, these would not be bargains. Far from there. After all, Laurene Powell Jobs and her Emerson Collective own a lot of anonymous content. But the streaming behemoths will pay for the A-list content they need to win.

These are just the potential mega-deals in the streaming video space. I’m not saying they will happen now or even soon. But trust me, Warner Bros. Discovery, NBCUniversal and yes, even Netflix, will arrive. Outside of the very real antitrust headwinds right now, financial buying conditions are certainly not getting much better for big tech than they are today. And even as market conditions change dramatically in the months and years ahead, big tech’s fundamental liquidity asymmetry has created an enduring new world order of media and entertainment fueled by Silicon Valley.

While we wait for those shoes to drop, let’s not forget that dozens more media and entertainment M&A deals are likely in the works right now due to market conditions. Some will make headlines. Many will not. But all mergers and acquisitions in media and entertainment will be fueled by a healthy dose of technology.

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