Acquisitions Galore in M&E’s High-Flying Circus

It’s a funny thing when the future of work becomes the “now” of work.

Take the media and entertainment industry.?In our recent report “The Work Ahead in M&E: Scaling a Three-Dimensional Chessboard”, we accurately identified the impact that rampant M&A activities were having on the industry – a competitive “must-do” for all players as big fish gobble smaller fish.

This comes at a time when the industry’s ever-accelerating variables have become so unrecognizable in a post-COVID world that M&E executives might feel they’re being forced to play Star Trek’s futuristic, three-dimensional chess game – without knowing the rules.

The trend is now accelerating and giving added lift under the wings of dominant digital platforms; as our report was publishing, Amazon announced it was intending to acquire MGM for a whopping $8.45 billion.?In the words of Esquire magazine, “MGM owns countless desirable franchises, like Rocky and Legally Blonde, but the jewel in the studio’s crown is undoubtedly the marquee James Bond franchise, a massively profitable and fiercely guarded piece of intellectual property”. ??

Mister Bond, meet Mister Bezos.

Fueled by a high-flying circus of competitive chess moves and access to (for now) cheap capital, it’s the franchises like Bond (fostered over years of reruns, sequels and nostalgia) that are the center of the acquisition frenzy, building – brick-by-brick – major-league sources of enduring, high-quality, watch-it-again, binge-worthy content.?

But laggards take heart: it wasn’t that long ago that the strategies at both Disney and Netflix were derided as being late or off-key.?Consider: even though pundits said Disney+ was a tardy direct-to-consumer pretender, it has already attracted more than 100 million subscribers to the service, surpassing its goal of 90 million. In fact, at its December 2020 investor conference, Disney announced 105 new movies and TV series, with 80% earmarked for deployment to Disney+. (En garde, Netflix). Even the late-to-the-party M&E sector of publishing has seen examples of a digital revenue renaissance in the last few years as a direct consequence of paywalls and content packaging.

Moreover, witness newer entrants to the streaming game like Paramount. The company’s “Paramount Mountain” campaign for Paramount+ underscores that it’s really just an agglomeration of unrelated properties (yet you know you’ve got a weird, if not wonderful, amalgam when Dora the Explorer meets Beavis & Butt-Head – all under the aegis of the competitive differentiation afforded by the brand).

As innovations like digital personae in gaming or digital twins fuel part of an ever-broadening M&E business-to-business value chain (B2B2X), the stakes here really are higher. Looking further into the future of the diversification sweepstakes, is it conceivable that a player like Twitter, Disney, Spotify or Netflix buys a cable company? We might say “stranger things could happen,” as seemingly weird moves like Square buying a majority of Jay Z’s Tidal start to feel reminiscent of the head scratching that first accompanied the announcements of Amazon buying Whole Foods and The Washington Post.?

(All slightly less weird than Bond’s Max Zorin wanting to corner the world’s semiconductor market by flooding Silicon Valley by dynamiting the San Andreas Fault – while travelling via a blimp festooned with his corporate logo.?But hey... look over there... Is that a Blue Origin rocket that just launched...?)

It’s worth noting that M&E organizations that have traditionally grown organically – and even those that lately have done so through acquisitions – still find themselves structured in silos. Given the importance of streaming, it’s become a competitive necessity to restructure (and engage in risk-taking) to amplify innovation and experience-based offerings. Historically, studios have never been direct-to-consumer, as they were always wholesalers. Change management has never been more important for traditional M&E businesses that are now going head-to-head with digital natives such as Netflix.

In order to fully compete, it’s essential to invest in disjointed content to attain bundled content and recurring, subscription-based revenue streams (what NYU Stern School of Business professor Scott Galloway and his fellow “Pivot” podcast co-host Kara Swisher have called “rundles”)8 but at a quality and cohesion of experience that audiences find irresistible. Viewer experience closely correlates to audience retention and needs to be brought into strategic planning early on – aspects like curation, recommendation engines using AI/ML, all done through the lens of human experience.

The future of media and entertainment will offer a world of opportunities, but to advance to new levels of the chessboard requires substantial steps and boldness. ??

And unlike Bond’s martini (and the many mixed metaphors of this Blog post), the success of their M&A strategies may leave M&E leaders feeling stirred, not shaken.

To learn more, please download our report, The Work Ahead in M&E: Scaling a Three-Dimensional Chessboard