October 28, 2016
By Bart Spiegel, Partner, Entertainment, Media and Communications Deals
After a strong start to the first half of 2016, Q3 deal volumes in the Entertainment, Media & Communications (EMC) sector tapered to 145 deals, a 23% decline from Q2’16, the lowest volume in the last twelve months. And even with a 53% decline in deal value from last quarter, that total still reached a healthy $19.2 billion—driven in part by Verizon’s announced purchase of Yahoo for $4.8 billion.
Despite continued US and global political and economic uncertainties during the quarter, we see more focused and disciplined deal strategies coalescing within EMC. In particular we’ve observed that corporate buyers are bringing a very strategic and innovative lens to the deal-making process, focusing on the potential synergies of deals, the economies of scale, and how new capabilities will allow them to compete in a rapidly evolving business environment. That’s led to some fierce auctions that have driven up multiples, particularly in the Internet & Information and Film & Content subsectors.
One investing theme of note are deals that involve sports, live entertainment and streaming services. In an era where everyone is chasing content, a premium is being placed on events that can engage fans with immersive and/or live experiences such as eSports and concerts; these can open up new avenues to monetize offerings.
Two deals in the third quarter were emblematic of this trend. Arguably the most significant deal in the sub-sector was the acquisition of Ultimate Fighting Championship (UFC) by a consortium of buyers including IMG and a group of US private equity shops. No official deal value was announced, although the price tag was widely reported at about $4 billion.
For its new owners, the league represents a prime source of content, particularly in the digital arena. “UFC produces more than 40 live events a year and distributes its bouts to TV outlets in 156 countries and in 29 languages. The MMA giant is considered one of the US’s fastest-growing sports franchises, one that has strong appeal to millennials,” according to Variety. It is by far the richest sale in the history of professional sports.
Also during the quarter, Walt Disney Co. acquired a minority stake in BAMTech LLC for $1 billion. Disney’s investment in BAMTech –a global leader in direct-to-consumer streaming services, data analytics and commerce management with nearly 7.5 million total paid subscribers to its clients’ OTT products – will accelerate growth of its proprietary video-delivery platform, deliver greater flexibility to clients and develop new technologies and capabilities, according to Business Wire. As part of the transaction, BAMTech will become a key partner for Disney in the delivery and support of streaming video and other digital products from Disney|ABC Television Group and ESPN.
Given that PwC’s Global Entertainment & Media Outlook estimates that US streaming video is expected to grow to $15 billion, or 9.5% compounded annually to 2020, these two deals may be just the tip of the iceberg.
For a more detailed look at Q3’16 EMC deal activity please click here>