Media and entertainment giants have been in a near constant cycle of mergers and acquisitions since the turn of the century. However, 2024, will be remembered for the deals that didn’t happen.
In July, Paramount Global reached a historic agreement for an $8 billion sale to David Ellison’s Skydance Media after almost a year of fitful negotiations. There’s little doubt that more studio-network conglomerates — think Warner Bros. Discovery and NBCUniversal — would have been involved in serious M&A negotiations (possibly even for Paramount) if the regulatory environment had been more hospitable.
But by the fourth year of the Biden administration, key antitrust regulators at the Department of Justice and the Federal Trade Commission had sent a clear message to the business community: Curb your urge to merge.
“This is a regime that was ideologically motivated to say big business is inherently suspect and that large companies present risks economically, politically and socially,” says Mark Whitener, a senior policy fellow at Georgetown University’s Center for Business & Public Policy. He previously worked for the FTC under the George H.W. Bush and Clinton administrations.
The DOJ and FTC have taken tough positions that are a departure from decades of past practice for weighing the potential harm to consumers. Their harder stance on antitrust concerns has led regulators to come out swinging against proposed mergers such as JetBlue’s move to acquire Spirit Airlines or grocery giant Kroger Co.’s attempted takeover of Albertsons. In 2021, the DOJ fired a warning shot to Hollywood when it blocked Paramount’s sale of Simon & Schuster to Penguin Random House. Private equity giant KKR wound up scooping up the storied publisher for $1.6 billion.
As always, the numbers tell the tale. For the first half of 2024, the dollar value of M&A activity across all sectors rose by 5% compared with the first half of 2023, to $1.3 trillion, according to research by PwC. But overall transaction volume fell by 25%, marking the third year of a downtrend.
For Hollywood, the dilemma of the Biden years has been that the hammer on big-dollar dealmaking came down just as the legacy studios really needed a lifeline, putting more pressure on companies that were already struggling in the face of technological disruption, earnings erosion and, in some cases, heavy debt loads. This turmoil has led plenty of industry insiders who identify as liberal Democrats to question the reflexive hostility toward big business (especially Big Media and Big Tech) expressed by far-lefties such as senators Elizabeth Warren and Bernie Sanders.
“While they bow down to progressive doctrine, we’re drowning,” says a senior leader at one of the industry’s largest studios. “It’s amazing that they can’t see the reality.”
As Donald Trump prepares for a return to power next month, there is heightened anticipation for signals from his emerging administration about its regulatory philosophy. Traditionally, Republicans have been more amenable to the needs of business, but their behavior is less predictable at a time when populism is winning votes. What’s more, the dynamics for Big Media and Big Tech are complicated by the fact that Trump has had a contentious relationship with major players in both sectors. There’s no doubt that Trump’s fury at CNN contributed to the DOJ’s ultimately unsuccessful effort to block the marriage between its parent company Time Warner and AT&T.
On Dec. 10, Trump disclosed his plan to appoint Andrew Ferguson to succeed Lina Khan as chair of the FTC. Ferguson, already a member of the commission, has been critical of Khan for what he describes as waging “a regulatory assault on American business.” That suggests that the commission will take a different approach under his leadership.
As the new year approaches, Hollywood’s fortunes are slowly but surely improving. Jon Miller, a veteran investor who is CEO of Integrated Media, says that 2024 was the year that legacy studios such as Disney and Comcast’s NBCUniversal took the hard steps to address the declining fortunes of their linear cable channels. At the same time, streaming platforms are starting to eke out real profits. That means conditions are even riper for discussions of intriguing new combinations.
“You have [cable] that has supported the business for 30 years hitting a real inflection point. And you have your growth area hitting a positive inflection point,” says Miller. “The table has been set for significant M&A in the next 12 to 24 months — and not just all-out sales but also deals to reconfigure the portfolios and assets of entertainment companies.”
Georgetown’s Whitener says there is genuine debate in legal and policy circles that regulatory agencies — which are supposed to be removed from hardcore partisanship — are becoming yet another political battleground. Whitener notes that in the past, the FTC and DOJ would suggest remedies or concessions to a transaction that would allow companies to move forward with a merger. But those kinds of compromises have fallen out of favor.
“Antitrust enforcement moved from four decades of consensus and rational thinking that was bipartisan and predictable,” Whitener says. “When you move to a more ideological-driven populist approach, then you risk all kinds of unexpected outcomes.”
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