The growing importance of D2C is already having an impact on M&A (mergers and acquisitions) activity. Guy Bisson, Research Director at the analyst firm Ampere Analysis, pointed out recently that the WarnerMedia/Discovery merger is a horizontal deal that generates scale for two content businesses, whereas at one point we got used to vertical deals combining infrastructure (e.g., telecoms/broadband) with content. “Content scale is essential for success,” he declared.
Bisson was talking at Connected TV World Summit where he had previously explained the modelling that Ampere Analysis undertook on studio D2C viability. This showed that once studio streaming services reach 180-200 million subscribers they can, in theory, use D2C revenues to fully replace their current earnings from licensing content to third-parties and from their Pay TV channel businesses (advertising is not included in the model). It is this figure of 180+ million subscribers that puts the emphasis on scale.
“You are not going to reach those subscriber numbers without a ready supply of quality content [into the D2C service] that is regularly refreshed,” he warned.
Bisson says the content business has become truly global for the first time. “The content business has always been conducted on a global basis, but the footprint of operation and content deals has been geographically limited [for each individual deal that adds up to a global strategy].” He is referring to the physical realities of cinema (with buildings in countries) and Pay TV (attached to infrastructure across typically national or large regional footprints). “Now we are truly global, the sort of M&A we need is global.”
M&A does not have to be horizontal, marrying content with content, and deals can still be vertical, joining technology and content, but Bisson reckons that technology will be more global. He points to the Amazon and MGM deal as a good example. “That is a different kind of vertical. It is not a cable company plus TV channel or content group, but global technology.” We will see both these types of deals in future, Bisson predicts.
He says the change to a global content business marks a key moment for the Media & Entertainment industry. “’Global’ and ‘globalisation’ are throw-away words but when they are applied to the business of buying and selling and exploiting content, it represents a sea change in the way we do things.”
Want to hear more about content, D2C and super-aggregation?
You can see all the on-demand content from this year’s Connected TV World Summit, and it is totally free. This includes interviews with Discovery and ViacomCBS about their digital and distribution strategies, Virgin Media and Vodafone Spain about super-aggregation and the future of the user experience, and a discussion about super-aggregation featuring Swisscom, Tele2 and the U.S. public service broadcaster PBS. This event also addressed how we maximise the value of content. See videos here.
Connected TV World Summit 2021 – full agenda