Content Generation Not Easy, Driving Wave Of M&A

by , Dec 19, 2013, 4:17 PM
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In the current environment of big-time media mergers and acquisitions, some analysts believe the next wave will be new TV/media distributors and operators buying premium TV producers and filmmakers.

But content generation for the masses is no easy task. Even content generation for niche audiences is not easy.

Case in point: Google’s YouTube plan for “partnership” arrangements, involving those who create channels using the YouTube platform. YouTube benefits from a revenue-sharing agreement with the companies. Before this, it had relied almost solely on “user-generated” content. But YouTube isn’t specifically in the content generation game itself.

Some believe this type of effort isn’t enough, especially for the likes of Netflix and Hulu looking to pump up their users with ever-new TV and movie product. Both those services offer older non-exclusive TV programs and movies. Faster growth can only come from adding new stuff, according to analysts.

If you don’t believe YouTube has been hedging in this area, take a look at traditional media companies that have separated their content and distribution businesses, such as Time Warner Inc. and Time Warner Cable.

Others will point to Comcast buying NBCUniversal. But this concerns very big media players. While synergy is important, both entities were already mature and self-operating profitable businesses  for the most part.

For example, NBCUniversal cable networks were already on Comcast cable systems. Synergistic opportunities are more of a covering patina to draw in new clients and business that perhaps weren’t there in the past. But they won’t represent the bulk of overall future revenues.

Lastly, as we know, TV content production can be a risky business.  Digital TV owners need to be able to stomach failure – and a lot of it with little remaining ongoing value.

And then think about this: Hulu’s owners -- 21st Century, Disney-ABC and Comcast -- were only recently looking at divesting themselves of Hulu, in part to free up revenue-generating opportunities that were a hindrance because they also own big network TV groups.

Content acquisitions may be a seemingly attractive play for new digital owners. But a less-pretty, unpredictable side exists underneath it all.

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