People/Biz

Realscreen Live ’21: How M&A’s next wave is reshaping the unscripted content industry

From the Discovery-WarnerMedia tie up to Amazon’s purchase of MGM, a fresh wave of mergers and acquisitions is once again reshaping the media industry. Speaking at a virtual panel held yesterday ...
June 8, 2021

From the Discovery-WarnerMedia tie up to Amazon’s purchase of MGM, a fresh wave of mergers and acquisitions is once again reshaping the media industry.

Speaking at a virtual panel held yesterday (June 7) on the first day of Realscreen Live, which runs until Friday (June 11), Thomas Dey, CEO, president and founder of London- and Los Angeles-based ACF Investment Bank, said it’s the most activity he’s seen in 20 years.

“The technology and the telecoms and the content industry are all changing at the same time,” Dey said. “Every one of those players in those areas is looking for a way to survive, to grow, to change with the industry… I think it’s going to continue and it’s going to accelerate as we go forward.”

The session, “Entertainment 2025: Where the industry is headed and why,” was moderated by David Ciaramella (pictured, top left), communications manager at K7 Media.

Panelists — Hayden K. Meyer (top right), agency partner, EVP, head of alternative and factual programming, APA; Anjali Midha (top center), co-founder and CEO, Diesel Labs; Scott Purdy (bottom left), national media industry leader, KPMG; and Dey (bottom right) — discussed how the new era of mega-mergers will impact the screen content industry at large, how unscripted content will fare amidst the activity and what could be on the way in the near future.

“When we look at this year and next year… in the United States, unscripted makes up about 20% of all the content that is coming out,” Diesel Labs’ Midha said, adding drama comprises the other largest cohort (30%).

“It’s clear from the M&A activity that’s happening that everyone is looking at the breadth of their portfolios and unscripted is certainly a key piece of that.”

THE PRESSURE IS ON

APA’s Meyer said that activity means producers are facing even more pressure to create “undeniable and compelling” content.

“We as creators and the people who represent them are now literally competing against every television show ever made, not necessarily just the television shows that would be available on a linear programming schedule years ago. It really requires us to get very assertive and very creative,” he noted.

The pressure won’t be easing off anytime soon. KPMG’s Purdy said there’s likely to be no let up in M&A activity over the next 18 to 24 months, as more tech companies move in on legacy media entities.

“All of the companies are now in play,” he explained. “All of the big players — Apple, Google, Facebook, Amazon, all of those — have dabbled in content, are buying content, have billion dollar budgets around content. So, it wouldn’t be surprising at all to see all of these companies starting to jump into the mix.”

He added those tech giants are unlikely to solely acquire legacy media companies, and may look into other types of media, including gaming and podcasts. Production groups may also pursue similar acquisition strategies in the future.

“I’m hearing two things when I talk to buyers,” Dey said. “The message is twofold. One is game changing. They want assets that can actually change the dial… The other thing is they’re still looking for niche assets that fit their strategy, and that can be really small. So there’s still a range of interest from the streamers down to consolidators, broadcasters and studios. Everyone’s still playing.”

Meyer said consolidation is creating a competitive appetite as buyers look for projects with potential to drive subscriptions.

“It’s definitely had an impact and I think that’s really good for the creator from a sales standpoint,” he said. “What’s definitely not good for the creator is the fact that we’re starting to see monopolistic trends in the industry, and it’s going to be very difficult for us on the sell side in the near future to negotiate a robust deal, especially when a lot of these media companies control so many brands in-house, and I definitely am curious to see if and when the FCC will step in.”

THE DATA CHALLENGE
Consolidation means fewer decision makers, Purdy said, and though content spend continues to swell, that shift is creating some unintended consequences.

Diesel Labs is trying to remedy some of those issues. The content analytics company is using audience intelligence to determine how a piece of content might perform on any particular platform.

Midha said the research is still in the early stages.

“There is a little bit of a data asymmetry problem happening right now which is that, you have these massive platforms that have more information on how things are performing, how it’s actually helping with subscriber growth, how it’s maybe helping to prevent churn, and the creator side is sort of flying blind. They don’t have that information, or at least not to the level of detail that these platforms have themselves,” she explained.

“These are the new flavors of analytics that we’re going to see in the industry because having that extra little boost that says, ‘This is going to be better for you than it is going to be, hypothetically, for Netflix, therefore maybe you should spend X percent more to obtain this piece of content’ — that’s a strong argument to have in your back pocket when you go to the table and try to work with these folks.”

Despite the challenges, Meyer said it’s an exciting time to work in the content creation business, as buyers are hungry for projects that cut through.

“The buyers are rabid, they’re pickier than ever, it’s harder to hit that bullseye than ever — but I think that we have every reason to be excited, because while the subscription-driven channels are, right now, the destination, in time, we’re going to see AVOD come in to compete with them and doing originals,” he said. “I think that might also level the playing field as well as create much more opportunity.”

THE WAR FOR WHERE YOU’LL WATCH

The pandemic created the “most conducive subscriber acquisition market the world’s ever seen,” Purdy said. Now, the challenge for streamers is retention.

“What I think you’ll see is a lot of the streamers basically struggle to keep or to hit their subscriber estimates,” he added. “And then with the launch of several others over the past six to 12 months, the space is even more competitive. So, you go from the best environment ever to a very challenging one. There’s a lot of headwinds.”

Content plays a major role in subscriber retention, and Meyer said there’s an ebb and flow to those trends.

“You have to constantly reinvent, you have to constantly create new shows that people are going to want to subscribe for,” he said. “In a weird way, I think it is harder for the streamers than it was for the premium channels and the traditional linear channels, but that’s what drives innovation.”

As more bundling and consolidation take hold on the streaming side, all areas of the content chain will need to innovate.

“Premium unscripted is now very popular, and [streamers] are looking at ways of doing that effectively… Everybody’s trying to think how that works on a streaming platform. It’s a different pricing point,” Dey said. “They’re going to bundle those things together and try and distinguish themselves.”

Still, it’s uncertain what will turn the dial for consumers. Purdy said the number of streaming services per household sits between three and four, and that number could go up as high as six or seven.

“The other way to look at it is just total spend. How much are consumers spending on content?” he said. “I do think you’re going to have more jumping, turning on and off your subscription, to capture your shows and that will drive different release strategies from all the content providers.”

Looking forward, Purdy expects the linear TV model to increasingly move towards streaming and direct-to-consumer. Meyer agreed.

“I think over time, we’re going to start to see a shift in broadcast distribution to the AVOD platform. I think, ultimately, that’s the destination for broadcast and the broadcast spectrum,” Meyer said. “It’ll be very interesting to see what happens to that in the decades to come.”

About The Author
Barry Walsh is editor and content director for realscreen, and has served as editor of the publication since 2009. With a career in entertainment media that spans two decades, prior to realscreen, he held the associate editor post for now defunct sister publication Boards, which focused on the advertising and commercial production industries. Before Boards, he served as editor of Canadian Music Network, a weekly music industry trade, and as music editor for HMV.com. As content director, he also oversees the development of content for the brand's market-leading events, the Realscreen Summit and Realscreen West, as well as new content initiatives.

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