As another wave of mergers looks set to alter the media and entertainment landscape, Wall Street investors seem enamored with the prospect of major change in the often beaten-down sector.
Today’s stock market action offered abundant signs of the fever. On a day when the Nasdaq and S&P declined and the Dow 30 managed a meager 58-point gain, shares in Disney, Fox, Comcast, Viacom, Time Warner and CBS all surged between 1.5% and 5%. Discovery shot up 7% and AMC added 6%. Compared with the normally tip-toeing rhythms of media stocks, these are all sizable jumps.
To anyone following the intensifying speculation about Disney’s potential acquisition of Fox film and TV assets, the Monday movement suggests a deal could well be imminent. Fox shares gained 3% and Disney’s 5%. One of the day’s only decliners in the entire sector was Lionsgate, which slipped by a bit less than 1%. As an independent player on the rise in recent years, the company has long been subject of merger rumors, especially with inveterate wheeler-dealer John Malone now a major shareholder. Sony, which has been mentioned as a potential suitor for Fox, also gave up a fraction on the day.
While their stocks also put up modest gains today, AT&T and Time Warner took a break from making news. The companies’ waylaid $85 billion mega-merger and AT&T’s legal battle with the Department of Justice had been seen as a bottleneck that would need to be cleared before other deals could happen. Increasingly, though, media barons appear to be willing to drive aggressively even while under the caution flag. Looming large in their thinking is the disruption wrought this decade by Netflix, Apple, Amazon and other tech giants, which have the money and patience to slowly squeeze traditional players.
As shares were trading hands during the trading session, Disney-Fox was certainly Topic A at today’s opening day of the UBS media conference in Midtown Manhattan. The confab resumes Tuesday with keynote appearances by Viacom chief Bob Bakish and 21st Century Fox boss James Murdoch, among others.
“I do think further consolidation in media companies will happen,” Netflix content chief Ted Sarandos during a newsmaking session in which he announced the return of sidetracked series House of Cards and speculated about Disney’s OTT path. “It’s not just a matter of strategy, but a matter of survival in some cases.”
Michael Cavanagh, CFO of Comcast, was asked about the M&A climate. While Disney is believed to be in pole position to take over Fox’s assets, Comcast has also had discussions with the Murdochs, though Cavanagh did not directly address those talks. At Comcast, he said, “our focus is on quality content,” of which “we got plenty.” Contradicting the size-matters sentiment taking hold as companies grasp the scope of their battle with tech giants, he said, “Quality content is going to be the coin of the realm, I would say, more than scale.”