Category: Essay

(To read my vision of a super-mega-conglomerated future—where six companies control all media, entertainment, technology and communications, click here.)

Maybe I spent too much time on Wednesday’s essay. While I haven’t been working on it non-stop, I’ve been dabbling with it since December. Planning the next 12 years of mergers and acquisitions is fun. And time consuming.

That’s a lot of time, though, for a vague prediction of the future. Isn’t it a bit frivolous to decide, without any data really, how a bunch of companies could hypothetically merge in a potential future? That seems more fiction than fact.

But I don’t buy that. Beyond the fun, “Map of the Universe” I made—which is a pretty useful tool I’ll leverage in future articles—a strange hypothetical like this can often unlock ideas I wouldn’t have thought of via traditional means. And those ideas in some ways are more important than the exercise. Essentially, consider yesterday’s albeit hypothetical article the data set for today’s insights. 

So we’ll start with those, after one quick diversion:

Behind the Scenes – This was harder than I thought.

For two reasons. First, getting the companies “right” meant a lot of moving around to find what seemed to fit (Apple and Disney; Comcast and Vivendi), what didn’t seem to fit (Google, Apple and Amazon merging, for one) and what capabilities filled what needs (Netflix and Facebook). So playing around with that took some time.

Second, it never ceases to amaze me how much more there is to learn about entertainment. This is an admission from someone who calls themselves, “the entertainment strategy guy”. But you can always overturn another rock and find a whole bunch of new stuff to read and discover. In this case, the foreign conglomerates were my biggest blindspot. I knew about Vivendi (thanks to an HBR Vivendi Universal case study), but didn’t know much about Endemol Shine, Entertainment One and Bertelsmann (in particular) beyond name recognition.

I’d also add, you forget that even with all the consolidation in this industry, there are a ton of players. In the last 15 years, there have been plenty of new entrants from A24 to STX to Relativity (that is also now gone). 

Insight #1 – Europe is why this doesn’t happen.

After I’d assigned out all the American conglomerates, the missing piece was Europe. So I looked there to find the potential European champions, and ended up adding Vivendi and Bertelsmann, who I ended up lumping into Microsoft/Comcast/NBCUniversal and AT&T, respectively. 

But this won’t happen.

Likely many of my proposed mergers never happen. But this is one of the bigger leaps of faith. Even if I see a world where antitrust enforcement all but evaporates in the US—and even there I don’t see that—Europe is already tacking in a different direction. Even if, as a recent Economist article pointed out, Europe is looking for “European champions”, that doesn’t mean they suddenly love media consolidation. It also really means they don’t want their media companies being swallowed by giant American media and tech companies. The EU has gone after Google, Apple, Netflix and Amazon in various ways, so I don’t see it happening. This exercise further reinforced that in my mind.

(I did debate joining Bertelsmann, Vivendi and ITV, with maybe others as the European company, who could then swoop in for Dish, AMC Networks and Discovery (Scripps), but again tried to limit it to the rule of 6. But I do really like that company. I may have to update the article now…)

Insight #2 – Companies still ended up with “weaknesses”.

Even in a world of six massive, super-mega-corporations, they each still had weaknesses. This result surprised me, even as I was the person deciding on the fake mergers. In this new world the following companies have the following weaknesses:

Disney-Apple: No cable, cellular or satellite distribution.

MCV-NBCU: No social

Google-Mart: Limited film or TV production

Facebook-Flix-Ify: No TV channels

AT&T All Media: Limited technology

Amazon would be the most well rounded, especially if they buy Twitter. Amazon is the only studio without one of the former “Big Six” studios, but between Lionsgate, CBS Films and Amazon Stuidios, this isn’t really a big weakness. Some years Lionsgate beats Paramount for box office. Still, it was interesting that as you build out mega-conglomerates, it is still really hard to own it all and dominate every field.

Insight #3 – Device carriage will become the new “retransmission fee”.

One conclusion I had that wasn’t in the initial prompt was for “device makers” to get heavily involved. Obviously, Apple buys Disney. Everyone predicts that. But then I paired Microsoft with Comcast-NBCU and Sony with Facebook. Amazon and Google already make devices. 

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It’s been two weeks into the new year, but M&A is back!

Well, not officially. As I wrote about in December, despite the first six months of movement (with all its tricky ways to calculate), the last six months were relatively quiet in M&A in media and entertainment. (The biggest deal was Pandora getting snapped up by Sirius. Big but not earth shattering.)

But January is for predictions! With the end of year surge in “predictions for 2019” articles came the old standby prediction, M&A! I’ve seen predictions that Viacom and CBS will merge, that they won’t merge, that Apple will buy something (Disney?), Walmart will buy Roku, and Verizon will buy CBS.

On Twitter, I wrote at some point that with all the M&A expected, at some point between all tech, entertainment, media and communications companies we’ll have four companies left.

Huh. Four companies. Is it possible? 

So I started deciding who would join with who. Apple buys Disney. Easy. But who would Comcast buy next? Oh, Cox to expand its footprint. Amazon buys a cell phone company, because “Prime!” Others were harder. Who wants Sony? What happens to Facebook?

Once I started, I couldn’t stop. And now that joke turned into an entire article. But fear not! We can learn something about the strategic strengths and weaknesses of our current media & entertainment conglomerates by trying to imagine their hypothetical future.

The interesting part is that it isn’t like we were short on media overlords before this point. In 2000, we had six giant media conglomerates. In 2010, we had six even larger media conglomerates, but a cable company had just offered to buy one. In 2019, we lost a media conglomerate (Fox), but Netflix arguably replaced it. And AT&T bought another media conglomerate (while buying another communications juggernaut). If Paramount goes away, but Amazon buys Lionsgate and a some TV networks, arguably we’ll be back at six.

So that’s the goal: six mega-corporations who control our media and entertainment futures. Once the vertical integration barrier was broken, it was only inevitable that the rest join up. So let’s push this to it’s logical conclusion. Who are the six companies that will remain by the end of say the next decade? 

The Ground Rules

– I’m focusing on entertainment, media, communications (meaning telecoms/infrastructure) and technology firms. The tech firms are the big addition from, say, 10 years ago. However, if fun tangential companies pop up (they will), I’ll include them. 

– I’m going to avoid stealing M&A pitches unless they are very obvious (Disney and Apple) if I can. (I loved the if “CBS and Viacom don’t merge, and Verizon buys CBS” prediction from THR, for example. Since they came up with, I’m not stealing it. Though I am stealing the idea that Viacom and CBS ultimately don’t merge.)

– Microsoft gets invited to the technology party. Why? Well they have briefly overtaken both Amazon and Apple for largest global company by market capitalization. So they’ll join our other tech giants.

– This isn’t realistic. Especially from a regulatory perspective. This is contingent on the Department of Justice, FCC and FTC just about giving up. So basically, a second Trump presidency. Maybe just a Pence presidency.

– The mergers should make sense, from size, culture and need perspectives. I mean, since this is all fake, I can’t call this realistic. But economic rules should apply. For example, Netflix has a larger market capitalization than most entertainment companies, so an entertainment company can’t acquire it. On the other hand, Netflix has tons of debt, so it would struggle to acquire a movie studio. It’s complicated.

– My main criteria for matching up firms will be linking synergies, needs and then cultures.

– I need to end up with six. Some much smaller companies can be left out, but the goal is six super-giant conglomerates. 

The Candidates

Here’s my rough lay out of the “media, entertainment and communications” universe as it stands in 2019:

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