With ownership of TV programming rights becoming a vital asset in the international TV market, production company mergers and acquisitions have continued to rise over the past five years.
This type of activity has grown at a 19.4 percent compound annual growth rate (CAGR), increasing from 42 deals in 2013 to 102 deals in 2017, according to IHS Markit.
“The rising number of industry mergers and acquisitions annually was fueled by a number of factors,” said Tim Westcott, director of research and analysis for programming, IHS Markit.
“As advertising comes under pressure and audiences stray to on-demand platforms, broadcasters are exploring new revenue sources from content production and distribution. With increasing competition between traditional linear channels and online players, creating your own television content is a stronger option than licensing from third parties.”
Based on new information in the IHS Markit “Content Producer Mergers & Acquisitions” report, the United Kingdom ranked as the most active market from 2013 to 2017, in terms of number of mergers and acquisitions. However, in terms of deal value, the United States and China led the pack. “Both large and small companies are trying to find ways to internationalize, which is why Chinese companies have been gobbling up production studios in the United States, and the major Hollywood studios have been building local production networks in key foreign markets,” Westcott said.
Increased investment in drama content by Netflix, Amazon and other content buyers has had a large hand in the rising volume of deals involving scripted producers. In fact, deals for scripted producers have grown at a significant 29.2 percent CAGR — from 15 deals in 2013 to 54 in 2017. In comparison, acquisitions of unscripted producers have grown at a more modest 8 percent CAGR, due to the shift of merger and acquisition activity to scripted producers.
The leading production networks for mergers and acquisitions were ITV Studios and Fremantle Media, both of which invested in a large number of start-up content-production companies in the past few years. Of the 77 start-up companies launched between 2013 and 2017, 32 were drama specialists. Nearly half of these 32 drama specialists were launched in 2017, reflecting the very significant percent surge in scripted drama investment.
“Start-ups are predominantly launched by producers and creative talent with strong local market contacts, profile and channel commissioner relationships — vital ingredients for gaining the green light for new commissions,” said Aled Evans, senior research analyst, channels and programming, IHS Markit.
“The global producer networks offer these start-ups co-production finance mechanisms, worldwide contacts and funding. In return, the investor company gains rights for programming to sell internationally.”
Global production networks are not only buyers, but they are also targets. Liberty Global has invested in established global producers All3Media, ITV and Lionsgate, while Vivendi took an interest in Banijay Group and 21st Century Fox acquired a 50 percent stake in Endemol Shine.
“These deals for global producer networks highlight the strategic importance of owning content producers, for all those wanting to attract and retain viewers, subscribers and the revenues they deliver,” Evans said.