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Analysts eye next media mega-merger amid profit push

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Where is the next big media merger?

Fueled by sinking stock prices, debt-ridden balance sheets, increased competition, and a renewed focus on profitability, media and entertainment companies are reevaluating their portfolios as industry watchers expect more merger activity in 2023.

“It’s a pretty good inflection point,” Jon Christian, EVP of digital media supply chain at Qvest, the largest media & entertainment-focused consulting company, told Yahoo Finance. “The game has changed. It used to be just subscribers at all cost…but now [investors] need these services to be profitable.”

Bart Spiegel, partner of global entertainment & media deals at PwC, added: “We’re entering a chapter two of the streaming wars.”

“Only time will tell, but I think everything’s on the table to try to improve profitability and make the platforms more creative to their overall business,” he continued.

Deal volumes and values in the media and telecommunications sector slowed in 2022 compared to last year’s record, according to PwC’s biannual U.S. Deals Outlook.

Over the past 12 months ending in November, there have been 3,772 deals — a 26% year-over-year decrease — with announced deal value totaling $624 billion, an 18% dip versus 2021.

The firm attributed the slowdown to higher interest rates and inflation, coupled with growing geopolitical tensions and regulatory oversight.

The FTC’s recent antitrust lawsuit against Microsoft (MSFT) and its $69 billion acquisition of “Call of Duty” publisher Activision Blizzard (ATVI) and Paramount’s (PARA) blocked sale of Simon and Schuster serve as the latest examples of this more combative regulatory environment.

The Microsoft-Activision deal, along with Elon Musk’s $44 billion Twitter takeover, were the two largest deals announced in the media and telecom space this year.

The report included all deals announced in 2022 — regardless of whether or not they closed. Amazon’s $8.5 billion acquisition of MGM and WarnerMedia’s $43 billion merger with Discovery did not count toward this year’s total as they were announced prior to 2022.

‘Consolidation will happen’

Paramount CEO Bob Bakish doubled down on consolidation, more M&A in media

Amid this shifting landscape, media executives have floated merger and consolidation possibilities.

Paramount CEO Bob Bakish recently revealing during a UBS media conference earlier this month: “Consolidation has been the rule in business for a long time, certainly been the rule in media. So, it’s hard for me to bet on anything other than consolidation will happen in the future.”

Jason Kilar, former CEO of WarnerMedia and the founding CEO of Hulu, wrote in a Wall Street Journal op-ed published earlier this month he expects, “two or three major mergers and/or acquisitions involving entertainment companies in the coming 24 months” as cash flow challenges deepen.

Streaming losses have mounted in recent years as the cost of content continues to skyrocket.

Disney’s (DIS) direct-to-consumer division shed a whopping $4 billion-plus in its fiscal 2022, which ended on October 1, while Paramount guided streaming losses would total about $1.8 billion this year — higher than Wall Street expectations.

Warner Bros. Discovery (WBD), which has slashed its market cap in half amid its messy restructuring efforts, reported free cash flow of negative $192 million in the third quarter, compared to $705 million in the year prior. The company now plans to take on $3.5 billion in content impairment and development write-offs by 2024.

As WBD struggles for direction, many industry insiders believe the embattled company will sell again — making it a possible acquisition target in 2023 and beyond.

Another asset for sale will be Lionsgate’s film and TV studio, which the entertainment giant plans to spin off into a separate company, while AMC Networks (AMCX) continues to undergo a restructuring that could result in a sale.

Needham’s Laura Martin wrote in a recent client note Paramount could be attractive to unload, while smaller players like WWE (WWE), Curiosity Stream (CURIW), and Chicken Soup for the Soul (CSSE) will likely sell due to their size.

Disney CEO Bob Iger will also face a slew of decisions — including what to do with notable assets like Hulu (sell it to Comcast?) and ESPN (spin it off?).

Disney’s Chief Executive Officer Bob Iger speaks during the Bloomberg Global Business Forum in New York City, New York, U.S., September 25, 2019. REUTERS/Shannon Stapleton

“There’s definitely going to be assets for sale in the market,” Mary Ann Halford, partner at Altman Solon, said. “The bigger question is: What do we see coming out of the very large media companies? And we’ve also seen that the tech giants have been rather slow to scoop up these assets.”

As for tech behemoth Amazon (AMZN), Amazon CEO Andy Jassy said in an interview at The New York Times’ Dealbook Summit last month, “I do think over time we have opportunities to make our Prime Video business a standalone business with very attractive economics.”

“Customers would like to go to a place and find everything they want, they don’t want to go to 5 or 6 different places,” Jassy said.

What will drive M&A?

PwC noted demand for live sports, including sports-adjacent industries like sports gambling, will likely drive future M&A activity.

“There is so much money in sports, and getting live sports onto the streaming platforms is an area that is still not completely tapped,” Qvest’s Christian said. “The question there is: Can they put a pencil to it? Because the price is so high for the content. Are they now going to be able to get the subscribers necessary to be profitable in that business?”

Spiegel agreed that rising content costs will likely pressure future dealmaking, although more disciplined content spend could force platforms to partner up in order to offset production risks.

Amazon Thursday Night Football analysts prepare for a pregame live shot before the football game between the Philadelphia Eagles and Houston Texans at NRG Stadium on November 3, 2022 in Houston, TX. (Photo by Ken Murray/Icon Sportswire via Getty Images)

Other M&A opportunities could revolve around movie theaters, as box office ticket sales struggle to reach pre-pandemic levels, and video games, which provide lucrative monetization opportunities through franchise intellectual property (IP).

“A lot of these media companies are relying on their existing IP to monetize in the market across geographies and windows, as opposed to investing heavily and creating new IP,” Spiegel said, citing profitability concerns. “More traditional video game companies have that IP [and] also have the engines and technologies that help in the content creation process.”

Overall, though, the biggest M&A opportunity will be content — especially as consumers become more choosy with their subscription plans.

“Content and IP will always be attractive, because, not only is there a direct ability to monetize that existing content, IP, or library, but also the tangential opportunities to monetize through sequels or other types of storylines,” Spiegel said.

“You can look at so many different things, but you need to have quality content,” Christian added. “Content is always going to be king.”

‘It’s a tough world for financing’

As recession concerns weigh on investor sentiment heading into the new year, PwC predicated a negative impact on valuations.

“It’s a tough world for financing so [private equity] is more sitting on the sidelines right now,” Spiegel said.

“There’s likely going to be a gap between what sellers expect for the valuation of their properties, versus what buyers are willing to pay, because you have a diminished buyer pool and the access to financing is much more expensive,” he said.

Still, “I do expect private equity will return — they’re sitting on a significant amount of dry powder, but we just have to wait for the markets to come back in their favor.”

Altman Solon’s Halford added higher interest rates will fuel macro challenges after the Federal Reserve delivered investors its seventh and final interest rate increase of 2022.

“When people are looking to buy out something with equity and debt, the interest rate environment is definitely a headwind,” Halford said.

However, Halford said there will still be assets for sale next year, even with these challenges: “Wall Street is going to be on [these companies’] tails.”

Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com

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What to stream this weekend: ‘Civil War,’ Snow Patrol, ‘How to Die Alone,’ ‘Tulsa King’ and ‘Uglies’

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Hallmark launching a streaming service with two new original series, and Bill Skarsgård out for revenge in “Boy Kills World” are some of the new television, films, music and games headed to a device near you.

Also among the streaming offerings worth your time as selected by The Associated Press’ entertainment journalists: Alex Garland’s “Civil War” starring Kirsten Dunst, Natasha Rothwell’s heartfelt comedy for Hulu called “How to Die Alone” and Sylvester Stallone’s second season of “Tulsa King” debuts.

NEW MOVIES TO STREAM SEPT. 9-15

Alex Garland’s “Civil War” is finally making its debut on MAX on Friday. The film stars Kirsten Dunst as a veteran photojournalist covering a violent war that’s divided America; She reluctantly allows an aspiring photographer, played by Cailee Spaeny, to tag along as she, an editor (Stephen McKinley Henderson) and a reporter (Wagner Moura) make the dangerous journey to Washington, D.C., to interview the president (Nick Offerman), a blustery, rising despot who has given himself a third term, taken to attacking his citizens and shut himself off from the press. In my review, I called it a bellowing and haunting experience; Smart and thought-provoking with great performances. It’s well worth a watch.

— Joey King stars in Netflix’s adaptation of Scott Westerfeld’s “Uglies,” about a future society in which everyone is required to have beautifying cosmetic surgery at age 16. Streaming on Friday, McG directed the film, in which King’s character inadvertently finds herself in the midst of an uprising against the status quo. “Outer Banks” star Chase Stokes plays King’s best friend.

— Bill Skarsgård is out for revenge against the woman (Famke Janssen) who killed his family in “Boy Kills World,” coming to Hulu on Friday. Moritz Mohr directed the ultra-violent film, of which Variety critic Owen Gleiberman wrote: “It’s a depraved vision, yet I got caught up in its kick-ass revenge-horror pizzazz, its disreputable commitment to what it was doing.”

AP Film Writer Lindsey Bahr

NEW MUSIC TO STREAM SEPT. 9-15

— The year was 2006. Snow Patrol, the Northern Irish-Scottish alternative rock band, released an album, “Eyes Open,” producing the biggest hit of their career: “Chasing Cars.” A lot has happened in the time since — three, soon to be four quality full-length albums, to be exact. On Friday, the band will release “The Forest Is the Path,” their first new album in seven years. Anthemic pop-rock is the name of the game across songs of love and loss, like “All,”“The Beginning” and “This Is the Sound Of Your Voice.”

— For fans of raucous guitar music, Jordan Peele’s 2022 sci-fi thriller, “NOPE,” provided a surprising, if tiny, thrill. One of the leads, Emerald “Em” Haywood portrayed by Keke Palmer, rocks a Jesus Lizard shirt. (Also featured through the film: Rage Against the Machine, Wipers, Mr Bungle, Butthole Surfers and Earth band shirts.) The Austin noise rock band are a less than obvious pick, having been signed to the legendary Touch and Go Records and having stopped releasing new albums in 1998. That changes on Friday the 13th, when “Rack” arrives. And for those curious: The Jesus Lizard’s intensity never went away.

AP Music Writer Maria Sherman

NEW SHOWS TO STREAM SEPT. 9-15

— Hallmark launched a streaming service called Hallmark+ on Tuesday with two new original series, the scripted drama “The Chicken Sisters” and unscripted series “Celebrations with Lacey Chabert.” If you’re a Hallmark holiday movies fan, you know Chabert. She’s starred in more than 30 of their films and many are holiday themed. Off camera, Chabert has a passion for throwing parties and entertaining. In “Celebrations,” deserving people are surprised with a bash in their honor — planned with Chabert’s help. “The Chicken Sisters” stars Schuyler Fisk, Wendie Malick and Lea Thompson in a show about employees at rival chicken restaurants in a small town. The eight-episode series is based on a novel of the same name.

Natasha Rothwell of “Insecure” and “The White Lotus” fame created and stars in a new heartfelt comedy for Hulu called “How to Die Alone.” She plays Mel, a broke, go-along-to-get-along, single, airport employee who, after a near-death experience, makes the conscious decision to take risks and pursue her dreams. Rothwell has been working on the series for the past eight years and described it to The AP as “the most vulnerable piece of art I’ve ever put into the world.” Like Mel, Rothwell had to learn to bet on herself to make the show she wanted to make. “In the Venn diagram of me and Mel, there’s significant overlap,” said Rothwell. It premieres Friday on Hulu.

— Shailene Woodley, DeWanda Wise and Betty Gilpin star in a new drama for Starz called “Three Women,” about entrepreneur Sloane, homemaker Lina and student Maggie who are each stepping into their power and making life-changing decisions. They’re interviewed by a writer named Gia (Woodley.) The series is based on a 2019 best-selling book of the same name by Lisa Taddeo. “Three Women” premieres Friday on Starz.

— Sylvester Stallone’s second season of “Tulsa King” debuts Sunday on Paramount+. Stallone plays Dwight Manfredi, a mafia boss who was recently released from prison after serving 25 years. He’s sent to Tulsa to set up a new crime syndicate. The series is created by Taylor Sheridan of “Yellowstone” fame.

Alicia Rancilio

NEW VIDEO GAMES TO PLAY

— One thing about the title of Focus Entertainment’s Warhammer 40,000: Space Marine 2 — you know exactly what you’re in for. You are Demetrian Titus, a genetically enhanced brute sent into battle against the Tyranids, an insectoid species with an insatiable craving for human flesh. You have a rocket-powered suit of armor and an arsenal of ridiculous weapons like the “Chainsword,” the “Thunderhammer” and the “Melta Rifle,” so what could go wrong? Besides the squishy single-player mode, there are cooperative missions and six-vs.-six free-for-alls. You can suit up now on PlayStation 5, Xbox X/S or PC.

— Likewise, Wild Bastards isn’t exactly the kind of title that’s going to attract fans of, say, Animal Crossing. It’s another sci-fi shooter, but the protagonists are a gang of 13 varmints — aliens and androids included — who are on the run from the law. Each outlaw has a distinctive set of weapons and special powers: Sarge, for example, is a robot with horse genes, while Billy the Squid is … well, you get the idea. Australian studio Blue Manchu developed the 2019 cult hit Void Bastards, and this Wild-West-in-space spinoff has the same snarky humor and vibrant, neon-drenched cartoon look. Saddle up on PlayStation 5, Xbox X/S, Nintendo Switch or PC.

Lou Kesten

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Trump could cash out his DJT stock within weeks. Here’s what happens if he sells

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Former President Donald Trump is on the brink of a significant financial decision that could have far-reaching implications for both his personal wealth and the future of his fledgling social media company, Trump Media & Technology Group (TMTG). As the lockup period on his shares in TMTG, which owns Truth Social, nears its end, Trump could soon be free to sell his substantial stake in the company. However, the potential payday, which makes up a large portion of his net worth, comes with considerable risks for Trump and his supporters.

Trump’s stake in TMTG comprises nearly 59% of the company, amounting to 114,750,000 shares. As of now, this holding is valued at approximately $2.6 billion. These shares are currently under a lockup agreement, a common feature of initial public offerings (IPOs), designed to prevent company insiders from immediately selling their shares and potentially destabilizing the stock. The lockup, which began after TMTG’s merger with a special purpose acquisition company (SPAC), is set to expire on September 25, though it could end earlier if certain conditions are met.

Should Trump decide to sell his shares after the lockup expires, the market could respond in unpredictable ways. The sale of a substantial number of shares by a major stakeholder like Trump could flood the market, potentially driving down the stock price. Daniel Bradley, a finance professor at the University of South Florida, suggests that the market might react negatively to such a large sale, particularly if there aren’t enough buyers to absorb the supply. This could lead to a sharp decline in the stock’s value, impacting both Trump’s personal wealth and the company’s market standing.

Moreover, Trump’s involvement in Truth Social has been a key driver of investor interest. The platform, marketed as a free speech alternative to mainstream social media, has attracted a loyal user base largely due to Trump’s presence. If Trump were to sell his stake, it might signal a lack of confidence in the company, potentially shaking investor confidence and further depressing the stock price.

Trump’s decision is also influenced by his ongoing legal battles, which have already cost him over $100 million in legal fees. Selling his shares could provide a significant financial boost, helping him cover these mounting expenses. However, this move could also have political ramifications, especially as he continues his bid for the Republican nomination in the 2024 presidential race.

Trump Media’s success is closely tied to Trump’s political fortunes. The company’s stock has shown volatility in response to developments in the presidential race, with Trump’s chances of winning having a direct impact on the stock’s value. If Trump sells his stake, it could be interpreted as a lack of confidence in his own political future, potentially undermining both his campaign and the company’s prospects.

Truth Social, the flagship product of TMTG, has faced challenges in generating traffic and advertising revenue, especially compared to established social media giants like X (formerly Twitter) and Facebook. Despite this, the company’s valuation has remained high, fueled by investor speculation on Trump’s political future. If Trump remains in the race and manages to secure the presidency, the value of his shares could increase. Conversely, any missteps on the campaign trail could have the opposite effect, further destabilizing the stock.

As the lockup period comes to an end, Trump faces a critical decision that could shape the future of both his personal finances and Truth Social. Whether he chooses to hold onto his shares or cash out, the outcome will likely have significant consequences for the company, its investors, and Trump’s political aspirations.

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Arizona man accused of social media threats to Trump is arrested

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Cochise County, AZ — Law enforcement officials in Arizona have apprehended Ronald Lee Syvrud, a 66-year-old resident of Cochise County, after a manhunt was launched following alleged death threats he made against former President Donald Trump. The threats reportedly surfaced in social media posts over the past two weeks, as Trump visited the US-Mexico border in Cochise County on Thursday.

Syvrud, who hails from Benson, Arizona, located about 50 miles southeast of Tucson, was captured by the Cochise County Sheriff’s Office on Thursday afternoon. The Sheriff’s Office confirmed his arrest, stating, “This subject has been taken into custody without incident.”

In addition to the alleged threats against Trump, Syvrud is wanted for multiple offences, including failure to register as a sex offender. He also faces several warrants in both Wisconsin and Arizona, including charges for driving under the influence and a felony hit-and-run.

The timing of the arrest coincided with Trump’s visit to Cochise County, where he toured the US-Mexico border. During his visit, Trump addressed the ongoing border issues and criticized his political rival, Democratic presidential nominee Kamala Harris, for what he described as lax immigration policies. When asked by reporters about the ongoing manhunt for Syvrud, Trump responded, “No, I have not heard that, but I am not that surprised and the reason is because I want to do things that are very bad for the bad guys.”

This incident marks the latest in a series of threats against political figures during the current election cycle. Just earlier this month, a 66-year-old Virginia man was arrested on suspicion of making death threats against Vice President Kamala Harris and other public officials.

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