More Media Megadeals in 2024? Top Accounting Firm Thinks It’s a Good Bet

This year saw a slowdown in terms of media and telecommunications sector dealmaking, but there are signs of a recovery in M&A activity, top accounting and consulting services firm PricewaterhouseCoopers said in a Wednesday report.

Deal talk has returned to the sector with a vengeance, driven by recent talk that Paramount Global and its parent company National Amusements could be in play. And bankers are licking their chops ahead of April 8, 2024 when the Reverse Morris Trust lock-up period of the deal that created Warner Bros. Discovery ends, meaning that the company can get involved in possible M&A without having to worry about a tax penalty.

PwC also sees the end of the Hollywood strikes playing into sector deal ambitions. “As the Writers Guild of America (WGA) and Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) strikes have officially concluded, we expect to see upward momentum in the sector and an increase in transformational deals and creative deal structures,” its report highlighted.

“Despite continued financing challenges and regulatory pressure, we nonetheless expect an uptick in 2024 M&A as market players have spent the last several months re-evaluating their portfolios and are committed to seeking strategic partnerships that can drive growth — all with a consumer-centric focus on finding new and innovative ways to engage with their customers,” noted Bart Spiegel, global entertainment & media deals leader and partner at PwC U.S.

The firm’s latest deals report highlighted though that “the slowdown of deal activity in the media and telecommunications sector continued through the second half of 2023, with an uptick in deal value primarily driven by the $27 billion stock merger between Dish Network Corporation and EchoStar Corporation.” Without this transaction, the value of deals over the last 12 months through Nov. 15 would have amounted to $68 billion, “commensurate with the first half of 2023,” when that figure hit $59 billion, PwC emphasized. For the 12 months through mid-November 2022, PwC had calculated deal values totaling $256 billion.

How will the resolutions of the Hollywood strikes play into deal trends? “As a result, there is less uncertainty around go-forward economics and the time may be ripe for streaming platforms to re-evaluate their competitive positioning,” PwC argued in its report. “As cord-cutting continues and replacement options and pricing alternatives proliferate, streaming providers may increasingly seek strategic partnerships that have both complementary subscriber bases, accretive intellectual property and an aligned vision and strategy for attracting new subscribers.”

Sports also play into the M&A calculation. “Consolidation should help position the ecosystem to further the decline of linear TV as the remaining market players should have both the motivation and the financial means to aggressively pursue sports rights as they become available (e.g. the current NBA media rights expire at the end of the 2024/2025 season),” PwC noted. “Since live sports significantly contribute to the stickiness of linear subscribers, any transition of media rights to streaming platforms should serve to accelerate linear churn. Based on the above, we believe the conditions are ripe for consolidation in the streaming ecosystem as we turn the corner to 2024.”

Wall Street has as of late also mentioned sports as a potential driver of sector M&A. “We see Warner Bros. Discovery as a potential asset acquirer in the next round of media consolidation,” Guggenheim analyst Michael Morris wrote in a November report. Why? “Because airing NFL games has been shown to be critical to a leadership position in the evolving video ecosystem,” he explained, suggesting WBD could make a play for Paramount or Fox Sports. “No single content property drives U.S. consumer engagement like the NFL.”