Sky deal just the start for mergers and acquisitions
Last year was a big year for M&A in the global media industry and all the signs point to a busier 2017, especially in the traditional media space
The recent decision by Sky to back the £11.2bn (€13.1bn) bid by Rupert Murdoch's 21st Century Fox for the 39pc stake it did not already own in the company, rounded off what was a big year for merger and acquisition (M&A) activity in the global media industry.
With a new year about to begin, however, many analysts expect the pace of M&A activity to pick up considerably in 2017, as both vendors and buyers seek to put cash piles to better use, avail of frothy valuations and unlock growth by gaining access to new customers and technologies.
With the dark clouds of economic uncertainty beginning to gather ominously over several industries, now may well be as good a time as any to splash the cash. For would-be vendors who have taken their businesses as far they can, the next 12-18 months may also be the right time for them to cash in their chips. If one thing is certain, it's that the economic upturn is not going to last forever.
While the Sky deal has still to get the go-ahead from UK regulators - a process that will be fraught with lots of difficulties and considerable political soul-searching - on paper it makes sense.
With a growing cash-pile at its disposal, 21st Century Fox will be able to extend its reach into Europe where Sky has over 22 million customers in countries like Ireland, the UK, Germany and Italy.
Coming at a time when the traditional pay-TV business model is looking increasingly shaky, as newer on-demand streaming services gain traction among consumers, it also mirrors the trend towards the creation of industry giants that own both the distribution and the content. This is particularly true of AT&T's proposed $85.4bn (€81.6bn) acquisition of media company Time Warner, the company that owns HBO and CNN as well as the Harry Potter and Game of Thrones franchises.
AT&T is the second-largest mobile telco in the USA and believes that a Time Warner deal will add considerable fire-power to its armoury, which already includes DirectTV.
Closer to home, of course, other telcos have been plotting similar strategies. Virgin Media, which is ultimately owned by John Malone's Liberty Global, has already nailed down its purchase of TV3 and UTV.
Virgin Media owns the UK production house All3Media which has produced TV dramas including Penny Dreadful and Call the Midwife. It also owns New Pictures, which has produced dramas including Indian Summer and The Missing, while it has a stake in Lionsgate, the company behind Orange is the New Black, Mad Men and the popular Hunger Games franchise.
Elsewhere, Eir's acquisition of Setanta Sports, which took place this time last year, has gone according to plan and its TV offering has been building up steam after re-branding as Eir Sports, making it accessible to over 400,000 Eir customers.
Vodafone also has a TV offering, although it remains to be seen whether it will dip its toe in the content business.
But not all global media M&A activity was confined to the content and telco space during 2016. Other major acquirers during the year included all the usual suspects like Google, which made 15 acquisitions; Facebook, which made four; Microsoft which made eight (including LinkedIn) and Apple, which swallowed up no fewer than nine new businesses over the past 12 months. Expect more of the same in 2017.
But it's in the traditional media space of press, radio and possibly among some of the more mature digital businesses, that many analysts expect to be a hive of activity during 2017 and once again the Irish market is likely to see some of the action.
We've already witnessed some of this during 2016 after Rupert Murdoch's News UK's £220m (€264m) acquisition of Wireless Group, the owner of a raft of radio stations in the UK and Ireland including Dublin's Q102, and FM104. This gives the publisher additional firepower in both the Irish and UK markets at a time when revenues from both advertising and circulation are under pressure.
Elsewhere, Independent News & Media, publisher of the Sunday Independent, acquired Celtic Media Group, publisher of several regional titles. The group has also signalled that it may be in the market for further acquisitions.
While outright acquisitions are one thing, mergers could also provide an opportunity to unlock value within a market where revenues from traditional advertising are shrinking.
It is entirely conceivable, for example, that mergers could take place at both regional and national level in newspapers, magazines and radio as these are the media that have been most adversely affected by the flight to digital.
But mergers too are often fraught with difficulties with unrealistic expectations and culture clashes cited as the most common stumbling blocks.
One thing is certain: as the media market continues to undergo massive change, expect plenty of M&A activity over the coming years.
Contact John McGee at email@example.com
Sunday Indo Business