Makeovers, Takeovers And Much More Fun - Hurray For Hollywood

Michael Hedges March 14, 2016 Follow on Twitter

The great digital dividend has opened vast new opportunities for film and television productions, not to forget animation, games and live events. And the demand for all that is creating more demand, a cycle, perhaps virtuous, maybe silly. Shareholders have their demands, too; sometimes not in synch with anything else. With so much fun - and money - available nobody seems to want to share.

At the first of this month BeIN Media acquired big Hollywood film and TV studio Miramax. Private equity fund Colony Capital, a real estate specialist, and sovereign wealth fund Qatar Investment Authority (QIA) began feeling around for buyers last summer “as demand for content has grown with the rise of online viewing,” reported Bloomberg (July 17, 2015). The number floated at the time was in the vicinity of US$ 1 billion. The investment funds acquired Miramax in 2010 from the Walt Disney Company for US$660 million. In its 37 year history as an independent producer Miramax picked up 68 Oscar winners.

BeIN Media was created by the rebranding of Al-Jazeera Media’s sports subsidiary two years ago. It is the biggest name in Arabic-language television sports and increasingly elsewhere. The Miramax acquisition positions BeIN Media as a film and TV content producer as well as distributor. In mid-February BeIN Sports and French pay-TV operator Canal+ moved from bitter competitors to happy playmates with a sports content deal giving BeIN Sports distribution and Canal+ cash.

When parent Al-Jazeera Media announced earlier this year it would be closing the Al-Jazeera America operation observers suggested the Qatari royal family was running short of cash because of falling energy prices. A deal signed last year to acquire Turkey’s largest pay-TV operator Digiturk, reportedly for US$1.2 billion, remained in the “transfer process” until this month, reported haberturk.com (March 1).

Legacy Hollywood studio Paramount Pictures is in play as Viacom CEO Philippe Dauman indicated a search for that “strategic partner,” reported Variety (February 24). On offer is “a significant minority stake,” in the neighborhood of 40%. Big name possibilities have been floated, starting with e-commerce giants Alibaba and Amazon. A deal, said Mr. Dauman, could arrive before summer.

“It is a crown jewel out there,” said Mr. Dauman at Deutsche Bank’s annual media investor pitch-fest, quoted by the LA Times (March 7). "I feel very good about the kind of players we are talking to,” he said without naming names. Viacom investors, looking at more than sagging returns, pushed aside 92 year old Sumner Redstone, Viacom’s major shareholder, and appointed Mr. Dauman chairman in February.

“It’s tough to buy a minority interest in a private company,” observed Liberty Media CEO Greg Maffei at the Deutsche Bank conference, quoted by Variety (March 7). While individual movies are typically financed through multiple investments big company CEO’s share the “not in Evel Knievel’s side-car” philosophy. Liberty Media, principal shareholder being John Malone, has been suggested as a possible investor in Paramount Pictures or, even, Sony Pictures if a slice might become available.

Consolidation in the video content world is ongoing. Scale is important as video-on-demand providers need bigger and better titles to attract and hold subscribers. For about a year Lions Gate Entertainment and Starz have been in somewhat abstract discussions precipitated by the aforementioned Mr.Malone swapping a stake in the Starz pay-TV network for a stake in Lions Gate, including a board seat. Lions Gate is most famous for The Hunger Games film franchise and TV series Mad Men. It’s recent big budget Gods of Egypt flopped at the box office. Most famous for the TV series Outlander, Starz was spun-off from Liberty Media three years ago.

It’s been an eon since 21st Century Fox, principally controlled by the Murdoch family, made an US$80 billion bid for Time Warner that went nowhere. Both are huge companies involved in horizontal and vertical media holdings. Rumors, refuted by all, had Rupert Murdoch raising the bid at the first of this year by 20%. 21st Century Fox owns the 20th Century Fox studios, currently riding very high with the movie Deadpool.

And both operate in the stratospheric layer of publicly traded companies where investor pressure is everything. This barely effects 21st Century Fox as the Murdoch family controls the votes. But Time Warner’s Jeff Bewkes is out there all by his lonesome with jittery institutional investors. Time Warner owns Warner Bros. Pictures, the HBO distribution network and TV channels including CNN. The always colorful investor rumor mill has Apple watching “closely” for an opportunity to pounce on HBO as Time Warner studies certain Yahoo assets. Warner Bros. was the big Oscar winner this year, followed closely by Fox.

Another consolidation deal, indirectly related to Hollywood, is Vivendi’s almost certain acquisition of Mediaset’s Italian pay-TV unit Mediaset Premium. Creating a pan-European TV competitor to Sky Group, owned by 21st Century Fox, is part of CEO Vincent Bollore’s ambitious plan. The possibility of a more inclusive deal with the Berlusconi family is tickles the imagination. In addition to extensive television broadcasting and production holdings in Italy, Mediaset is principal shareholder in Spain’s biggest TV broadcaster, Telecinco/Quatro. M.Ballore, reported Reuters (March 9), “has a cash pile of €6.4 billion.”

In 2013 Vivendi acquired Canal+ Group, owner of the major French pay-TV operation as well as film and television producer StudioCanal. Vivendi, as it is now known, took on certain scale in 2000 with the very highly leveraged acquisition of Universal Studios and Universal Music. Overwhelmed with debt Universal Studios was sold to General Electric (GE), owner of US TV network NBC. Vivendi became debt-free and sole owner of Universal Music, the world’s biggest music company. At the end of February Vivendi agreed to pay the aforementioned Liberty Media US$ 775 million to settle a lawsuit arising from the GE/Universal transaction.

Neither the Walt Disney Company - Disney Pictures, Lucasfilm and Marvel Studios - nor Sony Entertainment - Columbia Pictures and TriStar - show signs of major distress. Time Warner’s shareholders will certainly force some sort of movement. Viacom or parts thereof are, however, is ripe for a takeover. And Rupert Murdoch - Fox - is always on the hunt.

See also in ftm Knowledge

Media Business Models Emerging

After a rough transition media business models are emerging. Challenges remain. There are Web models, mobile models, free models, pay models and a few newer models. It makes for exciting times. This ftm Knowledge file examines emerging business models and the speed-of-light changes. 137 pages PDF (January 2013)

Order here