The central theme in the television business in 2013 was consolidation, and 2014 should see it continue apace. Deals have popped up everywhere as the economy has roared back to life. Station groups, cable operators and content companies are all looking to increase scale and presence in new markets. Gannett-Belo, Tribune- Local TV, Charter’s play for Time Warner Cable— all of these are perhaps just a preview of coming attractions. Discovery Communications has reportedly taken a look at Scripps; AMC Networks often faces questions about its long-term independence; and even the once-almighty broadcast television networks are regularly mentioned as live bait.
Reconfiguring the television map gives many reasonable people understandable pause. Change can be confusing. Regulators have performed extra diligence, openly questioning some of the combinations, as is their proper function.
But as New Year’s resolutions and strategic goals are set in motion, this is a good moment to look at the consolidation wave in that same spirit. And our message is this: It’s here and it’s happening, as long as credit is cheap and advertising dollars continue to flow, so go ahead and weigh how you can make it work for you and your business.
The station sector illustrates the reality of consolidation’s continued march—and some of its upside. Addressing investors in New York last month, Perry Sook, Nexstar president and CEO, said M&A was in the “sixth or seventh inning,” with $1.5 billion of stations potentially in play. Scaling can help groups gird for advertising challenges and invest in mobile technologies that can help fuel news content’s relevance. And it has paid quick dividends. “It seems like every one of the groups that’s bought something has gotten rewarded by its stock going up,” says a CEO at one good-sized station group.
On both sides of the retrans negotiating table, scale certainly serves. But paradoxically, as the larger groups get larger, it also opens up opportunities for the really small guys. Notable figures such as former Gray Television president Bob Prather, now running Heartland Media, can scoop up the stray singles that the Sinclairs and Nexstars might have acquired but cannot retain due to regulatory rules. These days, that’s a bankable business model.
And speaking of regulation, if Comcast makes a play for Time Warner Cable, as has been speculated, the industry will get a gauge on FCC Chairman Tom Wheeler’s competitive philosophy. FCC watchers say the administration could use the deal to apply new conditions to a Comcast/bankable meld, as it did with the Comcast/NBCUniversal deal. Sen. Jay Rockefeller (D-W. Va.), chairman of the Senate Commerce Committee, also urged caution in “super group” station merger approvals. How Wheeler responds to such calls will further clarify his views.
Syndication is another area showing dramatic effects of consolidation. In short order, groups that own stations in the country’s largest markets— particularly New York, Los Angeles and Chicago—don’t necessarily have the final say in whether a show makes it on air. Supergroups headquartered elsewhere often do. In this new era, syndicators and station groups are working more closely together to create programming, creating new, innovative models for programming stations. That’s already happening, with groups such as Tribune partnering with CBS Television Distribution on The Arsenio Hall Show and The Test, and with Debmar-Mercury on next year’s Celebrity Name Game, and Scripps partnering with Telepictures on Let’s Ask America. Station groups also are creating their own original programming. Washington looking at deals from all angles, which should (hopefully) yield at least some new clarity on how the market can proceed; participants and shareholders reaping rewards; disparate factions of the industry getting to know each other better and even (gasp!) collaborating: These are some tangible signs of how to make the most of M&A.