Following last week’s U.S. election of Donald Trump to a second, non-consecutive term as president, executives at major broadcasters and at least one media company appear upbeat on the outlook under a new administration and potentially Republican-controlled Congress that could be favorable for consolidation, M&A activity and deregulation.
One example came by way of comments from Warner Bros. Discovery CEO David Zaslav last Thursday during an earnings call with equity analysts discussing the media company’s third quarter results, where he framed industry consolidation as necessary to meet consumer needs.
“I’ve been saying for a long time, this is an industry that really needs to meaningfully consolidate, and it’s really driven by the consumer experience,” Zaslav said.
He went on to describe a current consumer experience marked by a fragmented TV landscape that requires paying for and switching between several different apps to find and engage with content, which the CEO doesn’t see as sustainable.
Some consolidation could come by way of larger players bundling together (as WBD has done with Disney through a recent Max, Disney+ and Hulu bundle offering), but Zaslav also cited potential for players to come together more meaningfully – saying some wouldn’t have independent offerings or could potentially get a small equity stake to pair services depending on the market.
“And finally, just outright consolidation of an industry that is in a general disruption that’s facing real challenges,” Zaslav continued. WBD itself, while adding 7.2 million DTC subscribers globally in Q3 saw less-than-stellar performance from its studios and linear networks segments – the latter which it took a $9 billion write-down on in Q2 as the business continues to struggle amid wider pay TV industry declines.
Commenting on former and incoming President Trump’s election win, Zaslav suggested the environment could be more conducive to consolidation and deals.
“We have an upcoming new administration, and you know, it’s too early to tell, but it may offer a pace of change and an opportunity for consolidation that may be quite different, that would provide a real positive and accelerated impact on this industry, that’s needed,” Zaslav commented.
As The Hollywood Reporter noted in an article about media deals post-Trump win, it’s widely expected that one of his first moves will be to replace current leaders at key government and antitrust agencies, namely Lina Khan as chair of the Federal Trade Commission and Jonathan Kanter as head of the antitrust division at the DoJ.
WBD’s chief, meanwhile, emphasized consumer benefits from media and entertainment tie-ups.
“These are great companies…and if the best content is going to win, there needs to be some consolidation…in order to have these businesses be stronger and have a better consumer experience,” Zaslav continued.
As consumers do indeed appear frustrated with current viewing experience and rising costs associated with needing multiple streaming services that themselves have been increasing prices as they seek profitability, playing up the consumer-related benefits of consolidation could be a more regulatory-friendly approach.
But not all are convinced that streamers or media companies merging into mega providers will necessarily solve consumers’ streaming woes.
In an article on The Information, co-executive editor Martin Peers agreed with Zaslav’s view that the current consumer experience, plagued by navigating a sea of apps and prices, isn’t a good one - but doesn’t see steep discounts like from the WBD-Disney bundle as lasting. Peers thinks the prices of new bundles will continue rise – noting major players have already increased price points but streaming profits remain small compared to their historically robust but diminishing traditional network TV profits.
“And if consolidation happens, there’s a risk that bigger bundles will come, costing more money and resembling cable packages with a mix of some programs you watch—and some you don’t,” wrote Peers. “Zaslav may not be thinking along those lines, to be sure. But there’s a danger that allowing mergers will take us back to the worst of the cable world. That might be good for the companies, at least in the short term, but consumers are not likely to welcome it.”
In terms of a return to the cable package – many are trying to figure out new models in an evolving industry, where Sinclair CEO Chris Ripley last week touted Charter Communication’s strategy to strike carriage deals that involve including programmer’s DTC apps in the operator’s pay TV packages at no additional cost to consumers – categorizing it as the start of the so-called “great rebundling.”
And on the regulatory front, Ripley commented positively on Trump’s return to the White House.
“It does feel like a cloud over the industry has been lifted,” Ripley said. “I do think some modernization of regulations is coming.”
On the broadcast front, as The Desk pointed out, one regulatory question on the table impacting TV station owners is an FCC proposal to regulate OTT pay TV providers (aka virtual MVPDs like YouTube TV, Fubo and others, which provide TV service and lineup similar to that of traditional cable, but delivered over the internet) including rules that would require they negotiate carriage deals with local TV station owners rather than broadcast networks or affiliate boards, as traditional MVPDs are already required to do.
Another topic top of mind for broadcast station owners is TV ownership cap rules– deregulation of which, at both the national and local level, Nexstar CEO Perry Sook last week categorized as the No.1 legislative priority for the company and trade organization National Associations of Broadcasters (NAB). Although the FCC oversees rulemaking and regulation, Sook believes legislative action will likely be needed to change the national TV ownership cap as that’s how it was established – so requiring work both with regulatory agencies and lawmakers.
“It’s evident that the antiquated ownership caps applied to broadcasters do not reflect the reality of today’s competitive media environment. We believe that there is value to be created for our shareholders through further consolidation,” Sook commented.
He said that the industry’s real competition is coming from tech behemoths that have access to Americans via all screens, like desktop, mobile and CTV, across the country, but with which broadcasters ability to compete is “stymied by [TV ownership] regulations that were last update in 2004.” Sook also emphasized a need to preserve local journalism through companies that can compete on an even playing field. It’s a stance the CEO thinks can appeal to regulators and lawmakers on both sides of the political aisle.
“We’ve established our own government relations presence in [Washington], DC to work with both the regulatory agencies and the new Congress. And ultimately…we see this as a bipartisan issue appealing to Republicans due to its deregulatory nature and to Democrats as a consumer issue by preserving local news service in communities across the country,” Sook said during the company’s Q3 earnings call on November 7.
On the consolidation front, pending deal transactions in the media include Skydance Media’s acquisition of Paramount and DirecTV’s proposed merger with Dish, both of which, as David Bloom pointed out in this Forbes article, likely would’ve been approved regardless of the election outcome – but could benefit or forge forward more easily under a Trump administration.
Dish-parent EchoStar reports quarterly earnings tomorrow, Tuesday, November 12.