The Biden administration made a statement earlier this month when the Justice Department filed an antitrust lawsuit to block the $2.1 billion sale of Simon & Schuster.
Merrick Garland’s body block of the deal that ViacomCBS struck with Bertelsmann’s Penguin Random House sends the message that the White House is paying attention to the pace of consolidation in media and entertainment. If the antitrust division is worried about too much concentration among owners of the oldest of mass media platforms — books — just think how the Attorney General’s watchdogs would view nuptials among two major studios or more big-name broadcast and cable assets.
The sudden chill in the regulatory climate may fan the flames of another significant business trend. There’s a growing crowd of investors and private-equity groups — such as the Argus Capital Corp. SPAC led by former CBS honcho Joe Ianniello — that are waiting to pounce on small pieces of old empires that may be sold or spun off in the near future.
WarnerMedia and Discovery will be under pressure to divest some assets, especially outside the U.S., to secure approval for the $43 billion spinoff pact with AT&T that will bring WarnerMedia and Discovery together. AT&T’s eagerness to move on from its swan dive into the entertainment arena could make the company a willing seller of discrete assets in order to get the complicated transaction over the finish line.
It seems likely that under the Biden administration, the biggest of the Big Media pack — Disney and Comcast — would have a hard time pursuing major M&A deals without having to slim down first through asset divestitures. Sony Pictures Entertainment during the past 18 months has started the process of cleaving off some of its international channel assets in sales to small private investment groups, including one led by two former Sony Pictures TV Intl. executives. Asset sales are also helping giants like ViacomCBS and AT&T chip away at high debt loads.
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Speculation in the market about marquee brands that may be up for grabs is rampant. Cable channels with subscriber bases of 50 million or more are prized because they deliver predictable revenue streams, even if the earnings are destined to shrink every year as viewers cut the cord and embrace streaming platforms. The idea is to “ride the downside” and generate profits by carefully managing costs and hunting for efficiencies.
There’s unconfirmed chatter that some of the Turner entertainment cable networks may be packaged for sale as part of the Discovery deal. At Disney, big questions have swirled for more than a decade about how ABC and Freeform fit into the grand scheme at the Magic Kingdom, particularly in the streaming era.
NBCUniversal also has a number of established channels in its portfolio that could be an attractive package, a la E! and Oxygen.
In addition to private investors, the largest broadcast TV station owners could be contenders for channel divestitures. Sinclair Broadcast Group is believed to have pressed Disney on the possibility of acquiring ABC and its owned-and-operated stations in the past. Nexstar Media Group already has national scope through its 200-plus TV stations and NewsNation cable channel. It would not be a surprise to see Nexstar CEO Perry Sook pick up another channel or two if an auction free-for-all emerges next year.
The content marketplace is already undergoing a form of rapid-fire cell division around the world. The combination of regulatory pressure, the rising cost of debt and the market demands of Big Media’s transition to streaming is sure to fuel more industry shakeups in the months ahead.
