TV ecosystem turns to M&A as viewers change channels

Contact: Scott Denne

Television’s unassailable position at the top of the media pyramid is under assault. Audience attention shifting to digital media and advertisers following suit are bearing down on TV revenue, just as they’ve decimated print and radio. The largest slice of the advertising industry will be up for grabs in the next few years as big-budget brand advertisers seek new ways to reach the mass scale of audiences that are becoming increasingly rare on television.

Networks have long struggled with the sting of flat advertising revenue. For Viacom and Disney, two of the country’s largest programmers, you have to go back to 2011 to find a year where ad revenue posted anywhere near double-digit growth. An unexpected subscriber exodus from ESPN this summer left Disney with a rough Q2 earnings report and caused a major selloff in media stocks. And as viewers continue to drift from traditional TV, the networks and the cable companies that distribute their content are turning to M&A to hold onto their ad revenue – at Viacom and Disney alone, there’s $13bn in annual revenue at stake (much more if you include carriage fees and licensing sales).

The cable operators have been actively scooping up tech assets to help grow revenue through this transition. The major networks, however, have been relatively muted and their efforts so far are insufficient to stem the flow of billions of ad dollars into other channels. As the infrastructure for reaching audiences changes, they risk becoming disintermediated as advertisers seek ways to reach audiences without a large-scale media buy directly from the networks.

We recently published our full outlook for M&A as the networks and service providers that make up the traditional TV ecosystem look to adapt to the growth of digital video. Subscribers to 451 Research’s Market Insight Service can access it here.

For more real-time information on tech M&A, follow us on Twitter @451TechMnA.