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Newsmaker interviews

Reuters Newsmaker: Media companies seek “safe space” in uncertain future

Big media companies are joining forces to capture audiences and fund content creation. Is that going to help them traverse a challenging business landscape?

Media companies are facing the future by hoping there’s strength in numbers – specifically, very large numbers. Numbers like US$85 billion, which AT&T wants to pay to acquire Time Warner, and US$4.5 billion, the estimated amount Amazon spent on original programming last year.

Figures like those are popping up in headlines and regulatory filings as media organizations try to confront a radically changing future.

“Think about what’s happened,” said Samantha Greenberg, managing partner at Margate Capital. “Ten million people have cut the cord in the last five years. Last year was the first year – the first non-recession year – where television advertising declined, and you’re seeing companies like Netflix and Amazon approach the double-digit billion-dollar programming budgets that had traditionally been the purview of the NBC Universals, Disneys, the Time Warners. So, you are seeing a massive reaction to the realities of how the business has changed and how many structural challenges there are.”

Greenberg made her remarks as part of the Feb. 13 Reuters Newsmaker panel discussion,“No Safe Space for Big Media.”

Media mergers heat up

The easiest way to describe what’s occurring in the media world is to use the words of moderator Jen Saba, a media columnist for Reuters Breakingviews: “Everybody’s trying to get in everybody else’s business.”

Saba was referring to mergers and acquisitions (or talks related to) between big media companies that are looking to get bigger, such as:

Content and subscribers

Jim Murray, a partner at PJT Partners, said this rush to form alliances is driven primarily by the drive to acquire two things: Content and subscribers. The theory is that creative and original programming (Netflix’s “Stranger Things,” for example, or Amazon’s “Mozart in the Jungle”) will be popular and entice viewers or readers to pay to be able to access it.

However, that hasn’t always proven to be the case.

“People are making a bet that (content-and-subscribers strategy) is going to determine winners and losers over the long term. I don’t think there’s as much evidence to support that as people would hope,” Murray said.

How will regulators react?

Media companies aren’t the only ones who may need a new playbook to respond adequately to the near future. Regulators might need one, too.

Former Federal Communications Chairman (FCC) Julius Genachowski, now managing director for The Carlyle Group, said the overall approach to governing media companies will need to be rethought as companies we don’t traditionally think of as “media,” like Facebook, enter the fight for consumers’ attention.

“I think the big, looming convergence question is how to think about the big technology companies and looking at transactions or potential transactions involving traditional media companies,” he said.

Dede Lea, executive vice president for global government affairs for Viacom, echoed Genachowski’s sentiment that technology companies have significantly changed any concept of “business as usual.”

“Twenty years ago, we had the ‘lanes’ and it was just a few of us who would get together and talk about issues and work it out, and then we had these tech players come in and they were a  game-changer,” she said.

The entry of technology companies will also widen the geographic scope of the regulatory question.

“The mobile companies in the U.S…are national players. The big tech companies are global players,” Genachowski said. “When Netflix wakes up and thinks about adding subscribers, it’s thinking about global subscribers from day one.”

Learn more

Watch the full Reuters Newsmaker “No Safe Space for Big Media” and stay up-to-date with Reuters news.