Consolidation. It's the one word likely to come up in any discussion about the U.S. media business, from analyst reports to C-suite comments on quarterly earnings calls.
It's no wonder: A series of big-ticket, high-profile deals have been announced this year that could dramatically alter the American media landscape, sparking heated debates among consumers and regulators alike.
But just how much are these deals worth? In the first quarter, a combined $74 billion in M&A activity was announced, according to a new report from PricewaterhouseCoopers. Spanning the media, entertainment and communications industries (EMC), that represented an 80 percent increase from the $41 billion announced during the same period last year.
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"It's a very dynamic marketplace with the shift to digital," said Bart Spiegel, a deals partner at PwC US who specializes in entertainment, media and communications. "Whether they're more entertainment companies or media, everyone wants to make sure they are positioned right over the next five years and into the future."
Much of PwC's $74 billion number can be attributed to four "megadeals" exceeding $1 billion apiece, including Facebook's $19 billion announced acquisition of WhatsApp, Lenovo Group's $2.9 billion purchase of Motorola Mobility Holdings, and Media General's $1.6 billion merger with LIN Media.
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But the biggest by far was the February announcement that CNBC parent company Comcast would be merging with Time Warner Cable for $45 billion. That deal—which is pending regulatory approval—has since sent ripples through the sector, helping fuel the Federal Communications Commission's plans to a controversial proposal for updated open Internet rules at its Thursday meeting, triggering a second $20 billion divestiture deal between Comcast and Charter Communications, and spurring competitors' reactive multi-billion dollar dealmaking. AT&T, for example, is reportedly orchestrating an acquisition of satellite TV provider DirecTV for as much as $50 billion in a move that could be officially announced before the end of the month.
But while the dollar amount has surged, volume has not. A total of 209 deals were announced last quarter versus the 216 during the same time period in 2013.
The advertising and marketing space racked up the highest number, with 49 deals announced, followed by Internet-related and information services-centric companies that accounted for 42. Both spaces also welcomed the most private equity activity.
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Content drove deals as well—particularly television production, which PwC expects to significantly surpass 2013's volume for the year.
"The lines between the technology sector and the entertainment, media and communications sectors are blurring as the tech companies have started to invest in media especially content," said Spiegel. "We have seen a pickup in that capacity and we expect that to continue."
Multi-channel networks, better known as MCNs, became hot acquisition targets last quarter, as traditional content providers snapped up some of YouTube's biggest video content providers. The largest by far was Disney's acquisition of Maker Studios, for $500 million in cash plus another $450 million in incentives. (That deal, after a failed counter-bid by Relativity Media, closed earlier this month.) With the MCNs, media and entertainment companies get access to digital platforms that yield billions of views on YouTube from coveted teen and young adult demographics. Plus, they offer easy access to new, emerging talent.
PwC expects to see much more M&A activity in the MCN space moving forward.