How rivalries in media mergers are shaping the future of TV

The TV indus­try is in the grip of a series of mega-merg­ers. Lead­ing the way is AT&T’s pro­posed $85.4‑billion (£62.5‑billion) acqui­si­tion of Time Warn­er, which would turn the tele­coms giant into a con­tent behe­moth, with prop­er­ties rang­ing from super­hero fran­chis­es to CNN and Har­ry Pot­ter to HBO. Although the deal was blocked by the US Depart­ment of Jus­tice on pub­lic inter­est grounds, AT&T is chal­leng­ing the move in court.

Next is Disney’s block­buster $52.4‑billion (£38.3‑billion) acqui­si­tion of most of 21^st Cen­tu­ry Fox, a deal that has since been com­pli­cat­ed by NBCU­ni­ver­sal-own­er Comcast’s $31-bil­lion (£22.6‑billion) offer to buy Sky, of which Fox owns 39 per cent.

Mean­while, Voda­fone has joined the fray with an $18-bil­lion deal to buy Euro­pean cable net­works from Lib­er­ty Glob­al. Then there’s CBS’s still-in-the-bal­ance reunion with Via­com, whose brands include Para­mount Pic­tures, MTV and Nick­elodeon.

With media merg­ers and acqui­si­tions in the works, tele­vi­sion is in an unprece­dent­ed state of flux

With oth­er media merg­ers and acqui­si­tions report­ed­ly in the works, tele­vi­sion is in an unprece­dent­ed state of flux. This pro­tract­ed game of media musi­cal chairs is being dri­ven by four main forces. First, the tra­di­tion­al TV busi­ness mod­el is not so much ail­ing as in inten­sive care: TV adver­tis­ing is pre­dict­ed to fall behind dig­i­tal for the first time this year, accord­ing to Dentsu Aegis, while Google and Face­book are carv­ing up an ever-increas­ing share of the pie.

Sec­ond, over the top (OTT), where con­tent is streamed over the inter­net, is on the march. In 2014, OTT account­ed for just 10 per cent of the total US video indus­try val­ue cap­ture. Boston Con­sult­ing Group pre­dict this will dou­ble in 2018, a fig­ure which rep­re­sents more than $30 bil­lion (£22 bil­lion) in rev­enues in the Unit­ed States alone. The suc­cess of stream­ing play­er Roku also sug­gests a tip­ping point is on the hori­zon. In 2015, Roku users streamed 5.5 bil­lion hours of con­tent. By 2016 that num­ber had risen to 9 bil­lion. In the first half of 2017 alone, users streamed 7 bil­lion hours, rep­re­sent­ing 61 per cent year-on-year growth.

Then there’s the irre­sistible rise of the tech­nol­o­gy super­pow­ers and of Net­flix in par­tic­u­lar. Since launch­ing 20 years ago, the mon­ster stream­ing ser­vice now has 125 mil­lion sub­scribers in 190 coun­tries. Wall Street bank Piper Jaf­fray pre­dicts it will reach 160 mil­lion by 2020, while Net­flix says it will spend $7 bil­lion to $8 bil­lion on con­tent in 2018. That lev­el of spend­ing places Net­flix ahead of com­peti­tors such as Time Warner’s HBO and Hulu. How­ev­er, Net­flix isn’t the only tech play­er dis­rupt­ing TV as it’s esti­mat­ed by J.P. Mor­gan ana­lysts that Ama­zon spent some $4.5 bil­lion (£3.3 bil­lion) on orig­i­nal con­tent in 2017, while Apple plans to spend about $1 bil­lion (£733 mil­lion) this year.

So if these forces pro­vide the back­drop, what impact will they have on the future TV land­scape?

As we close in on the era of “stream­ing by default”, it’s now clear that along­side the major tech play­ers, OTT will favour those cor­po­rates with the brand clout and con­tent mus­cle to win mar­ket share. Dis­ney is exhib­it A. Ahead of pulling its con­tent from Net­flix in 2019 to launch its own stream­ing ser­vice, the enter­tain­ment pow­er­house has long been bol­ster­ing its intel­lec­tu­al prop­er­ty via acqui­si­tions of Lucas­film, Mar­vel Stu­dios and Pixar. Hence its play for Fox.

But while Dis­ney may be able to build an audi­ence for its stream­ing ser­vice, few oth­ers can. To mid­size and region­al broad­cast­ers, includ­ing renowned pub­lic ser­vice broad­cast­ers such as the BBC, this head­long rush to con­sol­i­da­tion of con­tent and finan­cial fire pow­er rep­re­sents an exis­ten­tial threat. BBC direc­tor gen­er­al Lord Hall has already warned that British TV pro­duc­tion is under seri­ous pres­sure from the rise of Net­flix, Ama­zon and Apple, and faces a £500-mil­lion short­fall.

Caught in a sim­i­lar bind, com­mer­cial broad­cast­ers are already team­ing up to help weath­er the adver­tis­ing storm. Such was the ratio­nale behind the recent tie-up between the UK’s Chan­nel 4, France’s TF1, Italy’s Medi­aset and Germany’s ProSiebenSat.1.

Mean­while, “cord-cut­ting’ will accel­er­ate. In Amer­i­ca, accord­ing to eMar­keter, 22.2 mil­lion adults will have cut the cord of their cable, satel­lite or tel­co ser­vice by the end of last year, a rise of 33 per cent from 16.7 mil­lion in 2016.

Yet these unchar­tered ter­ri­to­ries will throw up oppor­tu­ni­ties too, par­tic­u­lar­ly for niche, dis­rup­tive con­tent cre­ators. In the wake of VICE, Buz­zFeed and Com­plex Media, young media entre­pre­neurs in OTT and video on demand can now reach, build and mon­e­tise large audi­ences direct­ly.

The third dri­ver is TV has been some­what late to the par­ty with data. That’s set to change. It’s well known that Net­flix, while close­ly guard­ing its own data, uses it to dri­ve per­son­alised rec­om­men­da­tions. Deploy­ing data to hone com­mis­sion­ing, pro­mo­tion and even, per­haps, the cre­ative process itself is cer­tain to be adopt­ed across the indus­try.

A fourth trend is that we’ve entered the age of “peak TV”. A record 487 script­ed shows aired in the US mar­ket last year, while pro­duc­ers have gone from sell­ing to a hand­ful of poten­tial buy­ers to today’s pro­lif­er­a­tion of chan­nels, stream­ing plat­forms and ser­vices.

As the bat­tle for atten­tion inten­si­fies, tel­cos, cor­po­rates, tech giants and upstarts are all jock­ey­ing for posi­tion, result­ing in an alpha­bet soup of dis­tri­b­u­tion and busi­ness mod­els. With view­ers increas­ing­ly vot­ing with their remotes, the industry’s Game of Thrones moment is far from over yet.