2018 has been a year of transformation in the telecom and media industries.
Telco behemoths snatched up media and ad tech in an effort to compete against the Silicon Valley giants. Digital upstarts like Netflix or YouTube threaten cable-TV viewership and subscriber counts while the Facebook-Google duopoly has a chokehold on digital advertising.
What followed in 2018 were megadeals and industry-reckoning antitrust decisions by the DOJ.
AT&T scooped up Time Warner and AppNexus. Disney acquired 21st Century Fox and Comcast picked up Sky.
Those deals totaled nearly $200 billion.
Now, those companies have to hunker down and integrate those businesses. The execs running the businesses know as much. "You will work very hard, and this next year will — my wife hates it when I say this — will feel like childbirth,"newly-promoted WarnerMedia CEO John Stankey told HBO employees after the AT&T-Time Warner merger closed.
"If 2018 was the year where they focused on their future income statement, 2019 has to be the year where they focus on their balance sheet and make sure that they're strong enough to go compete against companies like the big tech platforms who live and die by their ability to acquire customers and integrate them into some kind of platform structure," Todd Klein, a partner at VC firm Revolution, told Business Insider.
But there's more M&A to come in the media and telco industries in 2019, analysts and investment banking experts told Business Insider. Here are the companies and sectors they'll be watching most closely in 2019.
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Digital native companies
The next wave of M&A will focus squarely on mid-sized digital companies, as ad dollars are hard to come by and these companies are challenged to diversify into other forms of reevenue.
"This includes companies like Cheddar, Tastemade, mid-sized gaming companies and others who dominate a sub-segment but who are trapped in an endless battle to achieve sustainable scale," Klein said. "Whether they bulk up together or combine with a larger platform, there will be fewer independent niche content players at the end of 2019 than at the beginning."
A broadband distributor such as Comcast could make a play for millennial business news service Cheddar to complement Comcast's commitment to the digital ecosystem that rests on access to broadband, Klein said.
Companies that have direct consumer relationships will also be targets in 2019 as their recurring subscription revenue can offset their reliance on advertising.
Roku also is seen as an acquisition target, with its 24 million active user accounts as of the end of the third quarter. Morgan Stanley analysts predict Roku will continue to pick up users over the next four years.
Other buyers could include big tech companies like Facebook that are heavily reliant on advertising, Klein said. "Facebook has a very narrow business model ... subscriptions would be extremely valuable to a company like that," he said.
CBS-Viacom and other entertainment assets
In entertainment, the focus is on a merger of CBS and Viacom.
After Les Moonves, chairman and CEO of CBS, resigned following allegations he sexually harassed and assaulted women throughout his career at the company, experts have speculated a CBS-Viacom merger would occur in the coming year.
"You need to be larger player in this environment," said Jim McVeigh, founder and CEO of CyndX and a veteran investment banker who advised on deals for AT&T, Comcast, and Time Warner. "And smaller players, even Discovery, are probably going to need to find a home. By being out there on their own, they are putting themselves at a strategic disadvantage."
A Viacom-CBS deal is a natural fit because CBS has football rights that would serve Viacom well, said Mary Ann Halford, a former Fox International executive vice president who is now a senior adviser at the strategy consulting firm OC&C Strategy Consultants.
Other sale targets in 2019 could be Lionsgate and Univision, both of which need scale to compete, Halford said. Lionsgate vice chairman Michael Burns acknowledged it would be willing to sell, and The Wall Street Journal has reported that Univision is exploring a sale.
Snap
Snap needs a bail out. It's strapped for cash and might need to raise capital by 2019, according to a MoffettNathanson report. It's also facing stiff competition from Facebook. All this points to a possible sale.
"We would expect Snap to be acquired before it goes bust, possibly by Netflix," Alex DeGroote, an independent media analyst, told Business Insider. Both are video companies that don't compete on product. And with $120 billion in market cap, Netflix could afford it.
Scott Galloway, marketing professor at New York University, named Google or Amazon as the likely buyer. He gave the slight upper hand to Amazon, given Amazon recently launched a commerce-focused partnership with Snap and Google's failed attempts at social media.
But Todd Klein, partner at VC firm Revolution, said he thought the possibility of a Snap sale has waned as the company has lost its luster. "They have not really consistently come up with an answer to Instagram," he said.
See the rest of the story at Business Insider