The battle for viewers has probably never been as tough as it is now. On Wednesday, June 27, the TV channel TV2 announced the acquisition of Chili Mobil. This is not an isolated event. Not long ago, the Danish telecom operator TDC tried to buy MTG Nordic, the owner of TV3 and Viaplay, without success.
In the United States, the same phenomenon has reached grotesque proportions. There are Comcast and Disney locked in an open war about content provider Twenty-First Century Fox, which owns the right to, among other things, The Simpsons. In the battle, Disney has increased its original offer by thirty six percent to $ 71.3 billion. Comcast has submitted a bid of “only” $ 65 billion, but the last word hasn’t been said yet. All of this happens just after the US telecom giant AT&T was allowed to buy Time Warner a few days ago.
These acquisitions are obviously inspired by the concerns that the emperors of the Internet economy trigger among media groups, and for good reasons. Netflix, Google (who owns YouTube), Amazon and Facebook (who own Instagram) are seriously committed to creating their own live video channels. All of these players follow the same recipe. On the one hand, they aggregate massive amounts of licensed content. On the other hand, they create their own exclusive content that will secure the user’s loyalty to their ecosystem. Netflix alone will spend $ 8 billion this year making its own series and movies. Facebook has announced that they will spend “a few billion dollars” on securing exclusive content for their new video application Facebook Watch. Apple has signed an exclusive deal with “talk show” legend Oprah Winfrey.
There are two reasons for this furious development.
The first reason is that the days of classic linear TV are numbered. Video streaming is the future, but requires its price in the internet economy. Scale, a catalogue of content as wide and exclusive as possible and the “winner takes everything” dynamics have become key factors for survival. Building a new streaming service from scratch in competition with the internet giants is extremely difficult. Buying already existing streaming players with solid user numbers is therefore tempting. The battle between Disney and Comcast about Fox is not just about content, but is also a battle for video streaming favorite Hulu, now owned by both Comcast, Disney and … Fox. Included in the conglomerate of companies that AT&T has purchased in Time Warner, we find another video streaming pearl, namely the Netflix archenemy HBO.
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The second reason is the digital development towards interactive television. The combination of real-time user data collection, smartphone, voice-assisted assistants – like Amazon Alexa – and machine learning promises to raise the TV experience to a whole new level. Data and machine learning can increase the chances of success in developing new series and movies. It can also help to suggest exactly the content that the user most likely wants to look at at any given time. Social media can be used in combination with exciting content to increase user engagement on smartphone and PC. More targeted advertising becomes possible as well.
Broadband operators like AT & T and Comcast have in principle access to user data that can be combined with content and enable competitions in the interactive TV era. Disney is also aware of these opportunities and has made strong investments in artificial intelligence.
But the price to succeed is high. The acquisition of Time Warner has buried AT & T in debt. Whoever wins the fight for Fox will share the same fate. In fact, anyone who dares to join the content war and who can not subsidize it with huge cash flows from other core business areas is in a financial danger zone. Even Netflix is so charged with debt that the company’s bonds are referred to as «junk” in the financial community.
The winners of this new era are likely the best creators of quality content that can showcase several successes in their portfolio. They now have the opportunity to sell their creativity to the whole world and at high prices thanks to the global merciless competition in the new television landscape. Creativity is also an area where robots can not compete yet.
On top of that, technology companies in the realm of interactive TV are probably an attractive target for acquisition and an investment opportunity, The recent acquisition of Appnexus, a world leader in digital advertising technology, by AT&T, shows it.
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