Why Media M&A Is Just Getting Started

Last week my colleague Jay Taylor provided his take on the news that Comcast (NASDAQ: CMCSA) abandoned its plans to acquire Time Warner Cable (NYSE: TWC).media-merger-acquisitions

He noted that the collapse of the acquisition wasn’t a huge surprise, and that there are a number of other potential suitors for Time Warner Cable –including Charter Communications (NASDAQ: CHTR). Recall that Charter approached Time Warner Cable about a potential merger back in 2014.

So why all the talk about media M&A?

Consolidation is a great way to fight larger players, or to fend off new trends in the industry. One of the biggest “cable killers” over the last half decade or so has been the success of streaming content provider Netflix (NASDAQ: NFLX).

As our very own Ian Wyatt noted, the ridiculous subscriber growth of Netflix has translated into an ever more ridiculous climb in its stock price.

Netflix now has over 62 million subscribers, while Comcast has just 22 million customers. The streaming giant is here to stay. Now, it’s about figuring out how to survive in a post-Netflix dominated world.

The success of Netflix has helped solidify the fact that content creation no longer has to be joined at the hip to distribution. This helps make pure-play content companies very interesting right now.

Rupert Murdoch’s Twenty-First Century Fox (NASDAQ: FOX) tried to buy Time Warner Inc. (NYSE: TWX) last year, but was rebuffed. Murdoch and Twenty-First didn’t push the issue, in part because they didn’t have to. Like The Walt Disney Company (NYSE: DIS),  Twenty-First Century Fox is a dominant player in the entertainment space, and thus is less vulnerable to the Netflix threat than cable companies.

However, Time Warner Inc. (not to be confused with Time Warner Cable, which was spun off from Time Warner Inc. in 2009) is still enticing, with one of the most prized premium cable assets in the business, HBO. It also has other key brands, including CNN and Warner Bros. After spinning off its magazine, cable and music businesses, it has positioned itself nicely over the last few years as a pure-play in the movie and TV content creation business.

CBS Corp. (NYSE: CBS) and Viacom (NASDAQ: VIAB) are often overlooked, but they could both be in the market for an acquisition. CBS is a Viacom spinoff, which means they won’t be in the market for each other, but a deal between Viacom and Twenty-First Century Fox has been floated, given that they’d make a cable and broadcast powerhouse.

As for CBS, the obvious choice for a deal involves Time Warner Inc. CBS owns Showtime and Time Warner Inc. owns HBO, which means a marriage would bring two of the top premium cable networks under one roof. There are a number of other similarities as well, including the fact that both have strongholds in news and network cable.

The underrated dark horse is always John Malone, the deal maker running the Liberty Media Corp. (NASDAQ: LMCA) empire. Malone owns interests in Starz (NASDAQ: STRZA) and Discovery Communications (NASDAQ: DISCA). He’s already positioned Starz so that it has a closer partnership with Lions Gate Entertainment (NYSE: LGF), but it’s also the only remaining independent premium cable network.

Malone still owns a sizable interest in Charter Communications, but there are a lot of things he could still have up his sleeve.

Apple’s most closely guarded secret

On April 27, Apple blew away expectations yet again by beating Wall Street’s earnings estimates. Without a doubt, Apple is soaring higher than ever. Yet few analysts realize is that a little-known company is destined to soar right along with it. It’s Apple’s most closely guarded secret…one they would prefer you never know. Discover it right here.

Published by Wyatt Investment Research at