THE STREAMING WARS:
TECHNOLOGY TRENDS IN MEDIA AND ENTERTAINMENT By Paren Knadjian Practice Leader - M&A and Capital Markets
T
he U.S. media and entertainment (M&E) industry is the largest in the world. At $717 billion, it represents a third of the global M&E industry. It includes motion pictures, television programming and commercials, streaming content, music and audio recordings, broadcast, radio, book publishing, video games, and ancillary services and products. The U.S. M&E industry is expected to reach more than $825 billion by 2023.
What direction will this behemoth industry take in the 2020s and beyond? How will customers consume entertainment content? This is the question vexing every M&E company in the world plus the providers of broadband services, social networking, e-commerce, and consumer technology companies. BUY MARKET SHARE One way to be a major player in the industry is to buy other key businesses in the market. The most 360-degree player in this industry is now AT&T. With its $85 billion acquisition of Time Warner (which included Warner Brothers, TBS, TNT, HBO and CNN), it instantly became a key player in the M&E industry. It had previously acquired DirectTV for $67.1 billion in 2014. It is also investing heavily in 5G wireless, spending $982.5 million to buy 831 24GHz spectrum licenses from the FCC, excluding the costs of installing 5G equipment and infrastructure. Finally, it is a significant player in the wired broadband industry (fiber optics and copper) to home and business users. As for streaming, in October of 2019, it announced the launch of its principal Subscription Video on Demand (SVOD) service, called HBO Max, that will begin streaming in Q1 2020. It already has SVOD services such as HBO Go and HBO Now, but HBO Max will contain all WarnerMedia content (as opposed to just HBO). Another industry behemoth that is focusing on content and distribution (but not broadband) is The Walt Disney Company (WDC). In 2019, the company acquired the motion picture and TV content businesses of 21st Century Fox for $71.3 billion and bought the majority stake in Over-the-Top (OTT) service, Hulu, for $7.23 billion. Previously WDC acquired key branded content providers Lucasfilm ($4 billion), A&E Television (2.5 billion, co-owned with Hearst Media), Marvel ($4.3 billion), and Pixar ($7.4 billion). It launched its SVOD service Disney+ in the fourth quarter of 2019 and offered a bundled package with Hulu and ESPN+. Early indications are that Disney+ already has 40 million subscribers, although that number is possibly exaggerated by the 10 million or so Verizon Wireless subscribers, who received a year of free service. Another significant M&A play in the industry was the recombination of Viacom and CBS to form ViacomCBS, a media conglomerate that includes CBS Television, Showtime, Nickelodeon, MTV, BET, Comedy Central, VH1, CMT, Paramount Pictures and the publisher Simon & Schuster. The all-stock deal was structured as an acquisition of Viacom by CBS. They 4
KROST QUARTERLY VOL. 3 ISSUE 1 - THE TECHNOLOGY ISSUE
