Content is still king. With Dalian Wanda Group's $3.5 billion acquisition of Legendary Entertainment in January, this year's media and entertainment M&A activity kicked off with a bang that hasn't slowed down. Comcast's $3.8 billion acquisition of ...
Crunch Network Contributor
Jacob Carlson is a consulting manager for Manatt Digital.
How to join the network
Content is still king. With Dalian Wanda Groupâ€™s $3.5 billion acquisition of Legendary Entertainment in January, this yearâ€™s media and entertainment M&A activity kicked off with a bang that hasnâ€™t slowed down.
Comcastâ€™s $3.8 billion acquisition of DreamWorks Animation just three months later continued the trend of content consolidation and IP aggregation. Both transactions have varying motivations, but the common denominator is access to franchises and content that can be leveraged across the parent companiesâ€™ various business units.
Content and digital transformation strategies have driven M&A activity so far in 2016, with no signs of slowing down â€” and thus providing clues about where weâ€™ll see activity during the rest of the year.
One major trend that continues is Chinese investment flowing into the United States. AlmostÂ 50 percent of all U.S.-targeted M&A transactionsÂ from foreign investors came from China in Q1, and media and entertainment is a significant driver of that figure. In addition to acquisitions, there were a number of investments in U.S. film studios, including Film Carnivalâ€™sÂ $500 millionÂ investment in Dick Cook Studios and Perfect World Picturesâ€™Â $500 millionÂ investment in Universal Picturesâ€™ upcoming film slate.
Chinaâ€™s continued interest in gaining insight into how Hollywood works is paying off for both sides of these deals. This insight will continue to help them ramp up their own production capabilities and speed up their ability to compete with the current global content creators. As a result, Chinese investment and M&A in U.S. media and entertainment should continue throughout 2016.
Wandaâ€™s massive Legendary transaction allows it to vertically integrate content production with its exhibition business. Its announced acquisition of Carmike Cinemas in March forÂ $1.1 billionÂ added more theatres to its current count, which already includes other global exhibitors. This news came days after Wanda announced plans for aÂ $3.3 billionÂ theme park outside Paris. When viewed as a whole, this ecosystem of content and distribution outlets positions Wanda as a global media and entertainment leader for the foreseeable future.
In China, Wanda also holds a trump card over the other major studios in that it is a Chinese-owned/operated business, allowing it to navigate and potentially circumnavigate the Chinese theatrical quota system. Wandaâ€™s ability to leverage its insider position with future Legendary productions, as well as its own forthcoming Wanda Studios at Qingdao, should give Wanda a significant market share in the theatrical film industry going forward.
Comcastâ€™s acquisition of DreamWorks Animation gives it a wealth of content that it can use across its numerous lines of business, including its cable subscription service (Xfinity), theme parks (Universal Parks and Resorts), cable networks (USA, Syfy, Sprout), digital platforms (Watchable, Seeso) and production companies (Universal Pictures, Illumination Entertainment).
As the digital ecosystem expands, traditional studios are seeing an opportunity to diversify their tech and content strategies.
The potential overlap in animation capabilities with Illumination Entertainment is complicated, but could help Universal compete against Disneyâ€™s formidable one-two punch of Pixar and Walt Disney Animation Studios (if managed correctly). Comcast and NBCU also now have access to AwesomenessTVâ€™s target demographic, production capabilities and original IP. The key to this transaction will be the extent to which they successfully integrate their content cross-platform.
Content strategy factored heavily in Warner Bros.â€™ move to acquire Korean Drama SVOD service DramaFever for anÂ undisclosed sum, which will help the studio broaden its digital presence. Korean dramas are big business around the world, and WB has made a bet on proven content to widen its market reach. FuboTV, a soccer-focused SVOD service, raised $15 millionÂ led by 21st Century Fox, and Turner led aÂ $15 millionÂ round in Mashable. As the digital ecosystem expands, traditional studios are seeing an opportunity to diversify their tech and content strategies.
Virtual reality/augmented reality (VR/AR) investment has ramped up in â€œthe year of VR,â€ taking in $1.1 billion through February alone. Most of that investment was Magic Leapâ€™s Series C round of funding at almostÂ $800 million, but other companies involved included MindMaze with aÂ $100 millionÂ round and Wevr with aÂ $25 millionÂ round. While consumer products are still in the early phases, the overall excitement and wide-ranging applications for VR and AR are driving investment for those who want to get involved early.
Following Baobab Studiosâ€™Â $6 millionÂ round in December, Penrose Studios raisedÂ $8.5 millionÂ in March, highlighting a competitive race to become the go-to VR content creator for immersive animated content. Comcast Ventures recently led a $6.8 million investment in Felix & Paul Studios, producers of cinematic VR experiences. Investors see this industry as a tremendous growth opportunity, with projected industry potential revenue of $120 billion by 2020, according toÂ Digi-Capital. It doesnâ€™t appear that investment and M&A will slow down anytime soon.
Live streaming has had activity as well, withÂ IBMâ€™s purchase of UStream for a reported $130 million being the biggest transaction of 2016 so far. Twitter made a strategic decision to purchase the live-streaming digital rights for 10Â Thursday Night FootballÂ games this year. TheÂ $10 million price tag was especially low, considering Yahoo paid a reported $15-$20 million for the rights to live-stream one game last year. This gives Twitter a way to flaunt its Periscope functionality, potentially acquire users, increase engagement and recoup some of its investment with a limited amount of ad inventory that it will retain.
The NFL gets to broaden its distribution, experiment with alternative revenue streams, target a younger demographic and, ultimately, create more competition for the NFLâ€™s overall rights when they expire in 2022. It is very possible that the future of NFL broadcasts may lie with a digital-first platform like Netflix, Amazon, Facebook, Google or Twitter, each of whom has deep enough pockets to bid for the opportunity to capture the most valuable must-see live content in the United States. Expect the other professional sports leagues to watch this development closely.
The rest of 2016 should continue to see plenty of activity across the media and entertainment space as companies brace for the future of mobile and digital consumption trends.
Based on activity in 2016 thus far, itâ€™s clear we havenâ€™t seen the end of key transactions. Paramount Pictures is looking for aÂ strategic investorÂ to build out its international and digital capabilities, which would provide key content and IP access to the investor (although this process has become very muddled recently). Yahoo is fieldingÂ multibillion-dollar offers for its core business, and Anonymous Content, creators of Oscar darlingsÂ SpotlightÂ andÂ The Revenant,Â as well as TV hitsÂ True Detective andÂ Mr. Robot, is reportedly looking for aÂ minority investor.
Another area that could see more investment is the e-sports industry. It is expected to be aÂ $1.1 billionÂ industry by 2019, and traditional sports insiders are paying attention.Â Former Los Angeles Lakers basketball player Rick Fox bought his own e-sports team for a reportedÂ $1 million in December, while former and current athletes Shaquille Oâ€™Neal, Alex Rodriguez and Jimmy Rollins have recently invested anÂ undisclosed sum in e-sports team NRG. FaceIt, an online e-sports platform, raisedÂ $15 millionÂ in January. Brands and advertisers are beginning to spend money in e-sports as they take advantage of the massive viewership opportunities for targeted demographics.
The rest of 2016 should continue to see plenty of activity across the media and entertainment space as companies brace for the future of mobile and digital consumption trends. Consolidation of content and the need for diversification in the digital environment will fuel interest from traditional players like telcos and major studios. Investment from China does not appear to be slowing anytime soon, so expect those eye-popping headlines to continue throughout 2016 as it plays the long game.
VR will begin to consolidate around content and tech, allowing leaders in both areas to emerge by the end of the year. As e-sports continues to gain traction via mainstream coverage and traditional advertising opportunities, it wonâ€™t be long before we see e-sports live events vying for the same eyeballs as the current pro sports leagues and attracting additional investment dollars along with them.
Featured Image: max sattana/Shutterstock
entertainment news entertainment entertainment weekly entertainment center entertainment tonight entertainment earth entertainment book entertainment careers entertainment partners entertainment near me