Television content producer mergers and acquisitions more than doubled between 2013 and 2017, spiking significantly last year, an IHS Markit report suggests.
In all, according to the study, Content Producer Merger & Acquisitions, 2013-17, over the period M & A activity powered up at a 19.4 percent compound annual growth rate (CAGR), increasing from 42 deals in 2013 to 102 deals in 2017. The building trend reflects the vital importance of the ownership of TV programming rights.
“The rising number of industry mergers and acquisitions annually was fueled by a number of factors,” said Tim Westcott, director of research and analysis for programming, IHS Markit.
“As advertising comes under pressure and audiences stray to on-demand platforms, broadcasters are exploring new revenue sources from content production and distribution.” Westcott added: “With increasing competition between traditional linear channels and online players, creating your own television content is a stronger option than licensing from third parties.”
In some regions, Latin America, for instance, this scenario is driving a feeding fever in co-production. M & A is more effective in tying down talent, however. IHS Markit estimates that, in numbers of deal, the U.K. was the most active M & A market; in their value, the U.S. and China led ranking.
“Both large and small companies are trying to find ways to internationalize, which is why Chinese companies have been gobbling up production studios in the U.S., and the major Hollywood studios have been building local production networks in key foreign markets,” Westcott observed.
Rocketing up from 15 deals in 2013 to 54 in 2017, scripted TV production company deals are driving M & A, at a 29.3% CAGR. Unscripted M & A deals grew at a far more moderate 8%, according to IHS Markit.
Within scripted M&A, the investment in drama specialists has grown significantly, the report runs. In 2013 47% of scripted M&A deal were for drama specialist producers. In 2017, this had grown to 63% of all scripted producer deals.
In deal volume, ITV lead rankings over 2013-17 with 23 deals, followed by FremantleMedia (22), BBC Worldwide (15), All3Media (13) and Vivendi/Studiocanal (11). In M & A deal
size, and based only on published reports, NBC U ($3.8 billion, led by its DWA transaction) and Dalian Wanda ($3.5 billion, including its Legendary Pictures deal) were the biggest players.
Both ITV Studios and FremantleMedia invested in a large number of start-up content-production companies in the past few years. Of the 77 start-up companies launched between 2013 and 2017, 32 were drama specialists. Nearly half of these 32 drama specialists were launched in 2017. That is one indication of the “very significant surge” in scripted drama investment, IHS Markit observed.
The M & A activity is driven not only by immediate financial return but also strategic concerns. “The global producer networks offer these start-ups co-production finance mechanisms, worldwide contacts and funding. In return, the investor company gains rights for programming to sell internationally,” commented Aled Evans, senior research analyst, channels and programing, IHS Markit.