Synergies Apply To The Known

Michael Hedges December 14, 2016 Follow on Twitter

The digital age has made one factor more important than all others: scale. To thrive, if not only survive, media operators view consolidation as primary business strategy. Shareholders and stock traders agree; other insecurities pale. Above all, what is familiar is favored.

Big media house RTL Group announced this week intentions to combine its radio and TV companies, RTL France and Groupe M6. Nearly all big media mergers and acquisitions (M&A) hail to the deity of synergy. And bigger is definitely better, too.

Groupe M6, principally controlled (48.26%) by RTL Group, will acquire wholly-owned RTL Group subsidiary RTL France, requisite approvals assumed. Groupe M6 operates mostly entertainment TV channels M6, W9, 6Ter, Paris Première and Téva, second in revenues to TF1 Group. RTL France is to top earning national radio broadcaster with RTL, RTL2 and Fun Radio plus associated websites and sales house IP France. Combined revenues, quoted by Les Echos (December 14), are about €1.4 billion. The €216 million deal will be debt financed.

Folding RTL France into Groupe M6 is about synergies; ad sales, obviously, and technology. “We are re-organising our French TV and radio activities into one, fully integrated company which will definitely make us more competitive in the digital media world,” said the RTL Group statement. (See full RTL Group statement here) Not to be minimized, Groupe M6 will have full access to the rather large RTL France news and entertainment talent pool as well as the RTL trademark.

Though scales are much smaller, RTL Group consolidating operations in France is similar to the rumored 21st Century Fox bid for television operator Sky, in which it holds controlling interest. Five years ago News Corporation attempted to acquire Sky, then known as BSkyB, but that fell to that ugly and embarrassing phone hacking scandal in the UK that made impolitic regulatory approvals. Since then News Corporation split off its TV and film business into 21st Century Fox, holding separate its publishing assets, except for tainted UK tabloid News Of The World, which it closed. In the meantime, with the obvious blessing of 21st Century Fox, German and Italian Sky pay-TV operations were consolidated into the UK company for one big, happy Sky. News UK, the publisher wholly owned by News Corporation, recently jumped into the radio business in Ireland and the UK.

The 21st Century Fox deal for Sky, as yet not announced officially, could force independent shareholders unhappy with it all to sell out, called a “scheme of arrangement.” There are suggestions, quote the Guardian (December 12), that the plan is to de-list Sky from the London Stock Exchange and fold it all directly into 21st Century Fox. Somebody has lawyers working overtime. Most media watchers note the timing has everything to recent falls in the UK pound’s exchange rate against the US dollar, saving the Murdoch family a bundle. The suspected opening bid is in the vicinity of US$14.3 billion.

Another media deal is going the other direction. Big US broadcaster CBS and TV/film producer Viacom, both principally owned by National Amusements, ended merger negotiations that began in October. They were the same company until 2005 when the publishing and CBS assets were spun into a separate company, in many ways a precursor to the famous News Corporation/21st Century Fox split. CBS is proceeding with a spin-off IPO for its domestic US radio station assets when a buyer with deep pocket did not come forward. In 2014 Viacom acquired UK commercial TV operator Channel Five for a mere US$760 million.

National Amusements is owned by Sumner Redstone and daughter Sheri. Family and business intrigue has kept the gossip wags wagging for years. The Murdoch family has had their fair share of news headlines, succession and scion Rupert Murdoch’s personal life outstanding. RTL Group is principally owned by Bertelsmann SE, long held by the Mohn family, which has generally kept out of the tabloid news for decades.

The biggest 2016 media deal expected to materialize in the next few months is the merger, of sorts, of US telecom giant AT&T and TV broadcaster/film producer Time Warner. Both are publicly-traded and not dominated by legacy families. Multiple approval levels still exist for the US$85.4 billion deal announced in October. Neither company intrudes on each others market space, in traditional terms, but AT&T owns massive digital distribution and Time Warner produces tones of content.

The US Justice Department and media/telecom regulator Federal Communications Commission (FCC), both soon to be headed by untested political appointees, will make their views known in due course. On the campaign trail President-elect Donald Trump voiced opposition to the deal. reasoning unclear and, perhaps, irrelevant. Time Warner owns cable news channel CNN, an object of Mr. Trump’s continued derision.

See also in ftm Knowledge

Media Business Models Emerging

After a rough transition media business models are emerging. Challenges remain. There are Web models, mobile models, free models, pay models and a few newer models. It makes for exciting times. This ftm Knowledge file examines emerging business models and the speed-of-light changes. 137 pages PDF (January 2013)

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