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.