Megadeals will take a breather this year after 2018 marked massive consolidation. With Disney expected to finalize its Fox deal shortly, Comcast focused on Sky and AT&T integrating Warner Media, the new group of giants has its hands full.
Amazon, as it quickly scales its Hollywood presence, is likely to look at the remaining independent studios. But there’s no decisive need for the tech giants to buy a studio, in light of their ability to license content.
However, we could see exceptions in two key areas.
First, once Shari Redstone lands on a permanent CEO for CBS, she could push forward a merger of CBS and Viacom this year. And second, in the advertising world, look to ad agency holding companies to engage in deal making as their business gets squeezed by both consulting firms and programmatic ad platforms.
But when it comes to the smaller players media players, this year they’re likely to stick it out alone as they feel the pinch of their bigger rivals getting bigger. Discovery will double down on its niche services to lock in super fans of sports such as golf. And the companies that don’t have the scale to create a Netflix rival, as AT&T and Disney do, will increasingly focus on supplying Netflix and Amazon.
Netflix and Amazon need that content because of the transformation of Disney and Warner Bros. from suppliers into rivals this year. The corresponding pullback on licensing deals will bolster their own coffers and ability to produce more original content. Netflix will face real competition and consumers will be pushed to make tough choices.
This year, Netflix will face its first direct competition, from Disney+ and AT&T’s new service. Add to that the potential for a recession, and many consumers will start picking and choosing between the various streaming services. Will Disney+ cannibalize Netflix’s subscriber base thanks to cheaper pricing? Probably not, as the services will be quite different at first. But if the U.S. heads into recession, something has to give. Even if consumers swap the full TV bundle for a skinny offering, how many additional subscriptions can they maintain? Probably just a few. And that threat of overloaded consumers sticking with the one or two services that really provide value is what’s going to drive competition for content.
And when it comes to picking and choosing, the traditional TV bundle will lose more subscribers to skinny bundles. Expect traditional carriers such as Charter, Spectrum and Dish to suffer subscriber losses from blackouts. And blackouts are only going to become more prevalent. Cable companies can’t justify paying more, especially for second-tier channels. Content companies want to either secure higher rates, or convert viewers over to their own streaming services, which provide both higher profits and valuable data. HBO’s months-long blackout on Dish Networks is ongoing, and Spectrum subscribers are still unable to access Tribune channels after a New Year’s eve blackout.