Summer Blockbuster Deals – Verizon, Netflix Execute Acquisitions

Deal activity in the technology, media and telecommunications (TMT) sector is heating up as companies acquire to keep up with evolving technology and consumer demand. The internet and smartphones have changed how people view and share information with consumers, abandoning cable TV in favor of streaming services that provide customized TV and music on demand. The advent of social media, cheaper smartphones and cameras means anyone can launch their own channel without the backing of a media corporation. Just ask the famous Youtubers and Instagrammers who are bringing in cash from advertisements and sponsored social media posts.

Recognizing the changes on the horizon, large traditional players are using acquisitions to rapidly adapt to today’s changing environment. Some are acquiring out of necessity to gain scale, grab more of a declining market, and cut costs, while others are taking on a more proactive approach. Let’s look at some of the recent deals in the news.

Verizon acquires to build faster 5G network

Verizon is focused on building a faster 5G network to keep up with downloads, video streaming, other smart devices like Alexa and Google Home, or even automated vehicles. In May, Verizon beat out rival AT&T with a $3.1 billion bid for Straight Path Communications, which holds a large amount of millimeter wave spectrum that will be key to building a 5G network. In August, Verizon announced it would purchase WideOpenWest’s Chicago fiber network for $225 million to bolster current 4G capabilities and build its 5G network.

Verizon has executed a number of deals including the $4.48 billion acquisition of Yahoo to build its video capabilities and compete against other telecommunication and media providers.

Discovery Communications to acquire Scripps Network for $11.9 billion

As cable TV subscribers drop, two networks are merging to get a bigger slice of the pie. The acquisition will combine Discovery’s networks like the Discovery Channel, TLC, Animal Planet and the Oprah Winfrey Network with Scripp’s HGTV, The Food Network, and Travel Channel. The new company will have one-fifth of all paid TV advertisement in the US. “

“[The deal is] an unmatched opportunity to grow Scripps’ leading lifestyle brands like HGTV, Food Network and Travel Channel across the world and on new and emerging social and mobile platforms,” said Scripps Chairman, President and CEO Ken Lowe.

Netflix acquires comic-book publisher Millarworld

Deals aren’t limited to traditional players. Since coming onto the scene in 1997, Netflix has killed rental services like Blockbuster and is contributing to the decline of cable subscriptions. In its first acquisition, the streaming service provider will purchase comic-book publisher Millarworld to build its superhero shows which are popular among viewers. Netflix, like other streaming services including Amazon, is focused on building original content to attract new customers and retain existing ones.

A wave of consolidation is sweeping the TMT industry with more deals on the way; However, getting bigger is not enough, especially for cable TV providers who are in a declining market. Companies will need to be proactive to not only follow, but also anticipate consumer demand and market dynamics.

Photo Credit: Mike Mozart via Flickr cc

 

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