The rush to buy up content companies is showing no signs of cooling down. VIP reported last month that in just the first two weeks of the year, there were already five official and rumored M&A announcements involving major content companies. Well, add three more to the mix since then.
It was announced Thursday that Sony Pictures TV bought Industrial Media, the production company behind reality shows like “American Idol” and “90 Day Fiancé.” The deal valued Industrial Media at $350 million and will help Sony scale its unscripted content business and to diversify its overall content offerings.
A little over a month ago, rumors emerged that Lionsgate was looking to acquire STX Entertainment, and five days later, Legendary Entertainment sold a $760 million equity stake to private equity giant Apollo Global Management.
Private equity companies like Apollo have benefited greatly from the recent stock market boom. With all that capital, they set their sights on Hollywood and have been busy lately snatching up content companies with highly desirable IP. In addition to its stake in Legendary, Apollo and investment firm Standard General acquired TV station owner Tegna about two weeks ago in a nearly $9 million deal.
Fourth-quarter earnings season wrapped up last month, and we got a pulse check on the streaming space from the largest players. Some are struggling more than others to maintain subscriber growth, but the messaging from Wall Street was crystal clear. Investors who were once solely focused on subscriber totals now want to make sure the spending on programming to bring in those subscribers is done wisely.
Those who missed expectations or warned of slowing growth were punished (ahem, Netflix). While those who exceed estimates and painted a rosier outlook were rewarded.
Content is one of the most valuable assets in Hollywood, and platforms are revisiting their strategies in order to stand out among the competition. Quality content costs money, and to some, it makes more sense to just buy the content companies if they’re going to shell out the big bucks to buy up programming anyway. There’s a lot of money out there to be spent, and not necessarily an abundance of content players out there to be bought. Hence, the big valuations we’re seeing in the market.
While integral, content isn’t the only component in a successful streaming strategy. And Disney’s announcement Friday that it will be adding an ad-supported tier to Disney+ confirmed it. All the major platforms are in an experimentation phase, and different approaches will yield better results than others. Buying content companies could be feasible with the players with deeper pockets, but the steep price tags being shelled out might not make a whole lot of sense for everyone else.