Bezos and The Post: Lessons from media’s M&A history?

Contact: Tim Miller

When Amazon founder Jeff Bezos acquired The Washington Post, he commented that he was entering into ‘uncharted terrain’ that would require ‘experimentation’ in taking on an old-media company that has seen its operating revenue decline more than 40% over the past six years. If part of Bezos’ experimentation includes M&A, he may actually be entering fairly well-charted terrain – to the tune of about 750 transactions and $42bn in spending. That’s what traditional media and entertainment companies have totted up in buying technology, Internet or digital media companies since 2002. Two-thirds of those acquisitions have, not surprisingly, been in the broadly defined Internet content and commerce category, with news itself the most popular of the 20-odd sub-segments we track in that sector, accounting for 80 deals and nearly $3bn in spending during the period.

What we used to call ‘bricks to clicks’ M&A by media companies is actually on the increase in the most recent six years compared with the post-dot-com period of 2002-2007. With a few months still to go in the six years ending this December, we have already seen an increase of 25 in total number of deals over the prior six-year period. That said, total spending has decreased almost 70% to about $10bn in the most recent period, suggesting that fewer big – or wild – bets are being made.

A look at the list of largest transactions by news-oriented companies provides some sobering ‘charting’ of the historical terrain. For example, six years after its $580m purchase of MySpace in 2005, News Corp unwound the limping property for a reported $35m. And seven years after paying $410M, or 10x revenue, for consumer content site About.com, also in 2005, The New York Times Company sold it off to Ask.com for $300m, or roughly 3x revenue.

The data may suggest at least one other clue as to where Bezos should – or should not – focus his experimentation. One of the biggest increases in M&A activity by media companies in the past six years has come in the ‘analysis and reference’ sub-category, whose content businesses typically rely on subscriptions or per-use fees rather than on the advertising-based models that so many media companies have struggled to make successful.

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