The improving economic outlook, quickening pace of convergence and continuing structural challenges are likely to stimulate mergers and acquisitions activity in the media sector in 2014, predicts David Elms, head of Media at KPMG. During the first three quarters of 2013 the sector saw deal activity fall compared to the first three quarters of the previous year. This means there is now a pent-up demand for M&A activity in the sector which is likely to trigger more and bigger deals next year, according to Elms.
“The pace of change across the media sector is now so rapid that many businesses cannot adapt through a natural process of evolution - creating a market-leading proposition organically is becoming more difficult; companies need to make bold changes in strategy.”
Elms continued: “In the last few years we have seen the phenomenon of new market entrants emerging and eclipsing traditional media businesses before they even had time to change strategy.”
The search for original TV content among newer, but maturing, TV content providers such as Netflix and Hulu could also act as a catalyst for M&A activity, Elms added: “Many of these businesses are moving from offering secondary content TV content and films which have previously been broadcast - to offering primary content to secure a competitive advantage. This could result in these TV content providers acquiring producers of content. Furthermore, this strategy could lead to a convergence between businesses in other parts of the media sector including radio and print.”
“This type of content- focussed convergence is driven by a desire to create sophisticated communities of customers. Targeting such communities is not a new concept, but technology is making it an increasingly achievable ambition. For example, newspapers are offering their communities of readers links into financial services and radio stations are offering TV channels boundaries are increasingly being broken down. A consequence is that business models need to be able to change rapidly to remain relevant to consumers. Again, this need is likely to stimulate interest in M&A.”