Skip to main content

Media M&A Attracted by Model Differentiation

As Web properties are proving to be genuine businesses, their success brings along some unwanted baggage. Fledging digital media companies typically need a merger with an established media giant or capital infusion from an initial public offering to continue growing fast enough to beat back rivals and leap to higher levels.

The trouble is, as the price tags on digital media properties skyrocket, Wall Street investors and potential buyers in old media are skittish. Buyers remember the raft of promising Web acquisitions that were short-lived shooting stars. Alta Vista, the top search engine in the late 1990s, was eclipsed by Google after failing three times to mount an IPO. So some established media giants, put off by today's swelling price tags, are instead funneling excess cash to shareholder dividends.

Amid the gridlock over valuations, Kagan Research believes the Web space won't experience big-ticket mergers and acquisitions commensurate with its economic clout in the near term. Instead, expect a raft of medium-sized and small deals that represent cautious bets by buyers. Major media companies might mount IPOs for their digital businesses � mainly to highlight valuations that would otherwise be lost within the parent, and secondarily for some quick cash.

A moderate flow of M&A percolates including two acquisitions by Viacom-owned MTV. It agreed to pay $200 million for video content and game website operator Atom Entertainment and separately agreed to purchase for an undisclosed price Y2M: Youth Media & Marketing Networks. Y2M is in a stable (differentiated) niche because it provides web services to 450 college newspapers that would be difficult for any rivals to replicate, according to Kagan Research.

Popular posts from this blog

The Subscription Economy Churn Challenge

The subscription business model has been one of the big success stories of the Internet era. From Netflix to Microsoft 365, more and more companies are moving towards recurring revenue streams by having customers pay for access rather than product ownership. The subscription economy cuts across many industries -- such as streaming services, software, media, consumer products, and even transportation with the rise of mobility-as-a-service. A new market study by Juniper Research highlights the central challenge facing subscription businesses -- reducing customer churn to build a loyal subscriber installed base. Subscription Model Market Development The Juniper market study provides an in-depth analysis of the subscription business model market landscape and associated customer retention strategies. A key finding is that impending government regulations will make it easier for customers to cancel subscriptions, likely leading to increased voluntary churn rates. The study report cites the