Are the old M&A stars of the entertainment world fading?
Can established players in the entertainment sector still succeed without serious innovation, as the sector evolves?
You know a sector is starting to get a bit tasty if Rupert Murdoch feels that it is got too big for him and he can no longer make any serious money from it.
But that is what is happening in the entertainment space, best exemplified by the recent sale of Sky’s entertainment assets to Disney for a reported U.S.$71bn.
On top of this, to relatively little of the usual fanfare, Apple has launched its woefully-named video on demand service Apple TV+, clearly a play against the likes of Netflix, Amazon Prime, Google, and FireStick. It might as well be called Betamax or MiniDisc.
Little fanfare because, unlike many of the keynotes in the Steve Jobs days, there was no amazing product reveal at the end. It did not feel ‘hot’, revolutionary or likely to change the way we live our lives. Those are high expectations for sure, but that is where the bar is set for Apple.
No iPad, no iPhone, nothing revolutionary. It feels like they would run out of ideas and instead, fielded a rather awkward looking Oprah Winfrey and Jennifer Aniston on stage, celebrities from an earlier era. Does this mean the company with the largest cash reserves in the world, some U.S.$250bn – twice the wealth of Croatia, in case you were interested – is all out of imagination?
Something we can definitely say about global M&A in the entertainment sector is that the established players, often under significant state or government influence, are creaking at the seams as technology has democratised the space they previously monopolised.
In the UK, for example, state broadcaster, the BBC, which reputedly touches 90% of households each week, is struggling to face the facts of the new world.
Right now, we’re seeing corporate valuations topping out and starting to decline, with so many uncertainties on the horizon.
These uncertainties suppress projected earnings, and therefore suppress corporate valuations. Not all sectors are affected, however. Some are Teflon-coated at the moment: anything with IT, artificial intelligence, medical or healthcare in the title for example.
Our experience of recent transactions in the media and entertainment space reflects the cautious outlook of Mr Murdoch. While it is not the best time for entertainment businesses to sell for a good price, there are many interesting opportunities for the truly disruptive.
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