While uncertainties about regulation, the economy and the new digital realities are impeding deals, media moguls at Allen & Co.'s annual summit this week also appear chronically stumped about how to radically transform or purge their legacy assets while effectively integrating new digital businesses.
Rubbing elbows with fellow moguls can spark ideas, but implementing them back home is a formidable task. So-called new media acquisitions are usually layered atop existing operations, making for challenging integration. Comprehending the nuisances of digital interactivity and what it means in the vast media spectrum is equally challenging.
Just look at the disastrous results of media players trying to embrace social networking. AOL is practically giving away Bebo after paying $850 million for it in 2008. News Corp. is dogged by speculation that it must jettison MySpace, which it hasn't known what to do with since CEO Rupert Murdoch acquired it for $580 million. Murdoch's primary focus now is creating paid-content streams.
The truth is: media players have yet to make the most of the digital sea change.
Even Facebook, Twitter and other new billion-dollar players at the heart of social networking are still trying to determine how to develop revenue streams without violating user privacy and exchange. These relative newcomers are looking over their shoulders at the next new way to combine social networking, location, commerce and entertainment as exhibited by Foursquare, Groupon and Liberty Media's Lockerz. The landscape is littered with missed and failed new media deals because of integration misfires.
Newfangled media doesn't come with directions.
There is no owner's manual on how to transform established media companies into digital paragons. Apple CEO Steve Jobs, whose closed ecosystem of iPads, iPhones, iTunes and iAds has been the catalyst for mobile connectivity, was as relevant to the Sun Valley conversation as if he was there. Jobs, one of the few media moguls to have successfully reinvented his company for the new media age, once again avoided the event.
The gaggle of press mulling outside Sun Valley resort -- hanging on every innocuous mogul move or passing comment -- was fixed on headlining the latest "deals" without exhibiting much insight into what that really means in the chaotic media environment.
Deals will largely be smaller tuck-in acquisitions, distressed asset sales and consolidation, such as Cablevision's acquisition of Bresnan Communications cable systems for $1.37 billion and News Corp. trying to buy the remainder of BSkyB. The mega deals involving traditional media generally don't work out because so many of conglomerates' moving parts need radical fixing.
Even Comcast's controlling ownership of NBC Universal set for next year is a gradual takeover from General Electric, allowing for the reconciliation of cultures and economics over five years. Even so, there are no guarantees that Comcast can restructure NBC's challenged broadcasting business or reconcile its content with Internet challenges to core cable operations.
Walt Disney, which has had a better track record than most, is unloading its Miramax Films and is wrestling with a strained ABC TV Network, intricately tied to owned and affiliates TV stations and program production undergoing their own reinvention challenges. It continues to successfully fold in strategic upstarts, such as games maker Tapulous.
If content is king, then it shouldn't be a struggle for the storied MGM to deal with its $4 billion in debt, with expanded sales or a strategic alliance with Spyglass or another independent studio in a structured bankruptcy. All video and text content companies are vexed by securing what Iger calls "limited exclusivity" -- code for getting paid something on some media devices. So far, the paid vs. free content brawl has only alienated consumers.
As long as the values of content, assets and business models remain in flux, deals will be sparse and unnerving. Technology is as much challenge as opportunity as power shifts; it destroys wealth in one place and creates it somewhere else. Evidence that companies are at least investing in mobile media and technology: 188% growth in related deals from a year ago, according to Jordan Edmiston. That has put scores of Internet companies on the radar, including the digital content site Joost, social network builder Ning, content distributor Slingbox and online gamer Zynga.
$3 trillion of sideline cash held by banks, private equity and public companies underscores just how petrified investors are of getting burned.
The dilemma for media players is compounded by not knowing what the new digital norm looks like on a balance sheet. It will be a mix of refined historical and new. But interacting with consumers rather than pushing out content, goods and services is a completely different media dynamic, and it's not easily mastered -- even after a fancy Idaho huddle.