The Biggest Streaming Media Mergers and Acquisitions of 2016
“Anvato sells software that takes care of the backend systems for storing and streaming video,” writes Recode’s Mark Bergen. “The purchase is meant to boost Google’s ability to recruit media companies to its cloud storage business, which is trying to compete with Microsoft and Amazon.”
Anvato had significant expertise in mobile video delivery, including server-side ad insertion, and the second Google acquisition—of Paris-based Moodstocks—may augment Google’s argument as to why its cloud platform offers more features than competing cloud infrastructures.
Moodstocks has focused on computer vision and machine learning, as a way to “give eyes to machines by turning cameras into smart sensors,” and the acquisition may help Google ride the 360 ° video and augmented reality trend.
AT&T Acquires Quickplay Media
As a precursor to its DirecTV Now streaming service, AT&T used a company called Quickplay Media to power its U-verse TV Everywhere solution. That successful deployment of Quickplay’s managed solution for distributing premium video content to IP-connected devices led AT&T to announce the completion of its acquisition of Quickplay.
“The platform will support the streaming offers— DirecTV Now, DirecTV Mobile and DirecTV Preview— that AT&T plans to introduce later this year,” the company stated in the press release announcing the completion of its acquisition of Quickplay.
These new services, which finally launched in November 2016, are intended to let viewers stream DirecTV content over the internet to virtually any device. But the introduction of DirecTV Now has been anything but smooth.
The Verge covered the aftermath of the November launch with an early 2017 article titled, “DirecTV Now Appears to Be a Complete Mess.” “With any new technology there are going to be fixes that need to be made,” an AT&T spokesperson noted. While we understand we still have work to do, overall feedback on DirecTV Now has been very positive.”
Even the CTO of AT&T Entertainment, Enrique Rodriguez, admitted there had been problems with the launch.
“Absolutely there were problems,” Rodriguez told FierceCable, adding, “The problems were not as big as I expected. I’m so proud of the quality we delivered.”
Consumers continue to disagree, so we will follow up on the quality and delivery issues at the end of Q1 2017.
Rovi Acquires (And Then Becomes) TiVo
The acquisition of TiVo by Rovi might have threatened to end a well-known brand, but Rovi announced completion of the deal by stating that it would change its name to TiVo and retire the Rovi brand.
The deal, which was approximately $1.1 billion in total, consisted of $270 million in cash and new TiVo stock in the range of 39.7 million shares.
TiVo’s brand is strong across the globe, and the new company announced that it would see “at least $100 million in annual cost synergies, with 65 percent of these synergies recognized in the first 12 months.” TiVo plans to maintain its market share of 25 million households across approximately 500 pay TV operators in over 70 countries.
The company expects to realize at least $100 million in annual cost synergies, with 65 percent of these synergies recognized in the first 12 months. The company intends to provide fiscal 2016 estimates during its next regularly scheduled earnings conference call.
Stock prices peaked at $22.59 on Sept. 8, 2016, the day of the announced name change, but have dropped back to $19.65 as of the time of this article in mid-January 2017.
AT&T to Acquire Time Warner
Between the acquisition of Quickplay and the launch of DirecTV Now, AT&T announced a blockbuster potential merger, offering a combination of cash and stock to buy Time Warner, which is currently the world’s third largest entertainment company, based on revenue. The two companies ahead of Time Warner, in terms of revenue, are Comcast and The Walt Disney Co.
Comcast’s successful move from being a cable service provider to owning a number of premium content buckets, including NBCUniversal, vaulted Comcast’s stock price for a number of years. The company has gone on to purchase another content behemoth, DreamWorks Animation.
The Comcast deal went much better than the earlier Time Warner AOL acquisition—a cautionary $165 billion merger from the turn of the century that still has Wall Street shaking its head—and there’s hope that AT&T’s purchase of a pared-down Time Warner will result in a similar gestalt.
Time Warner, which has since spun AOL out into a separate company, as well as Time-Warner Cable and the magazine company now known as Time, Inc., should see a significant return when AT&T completes the acquisition.
If the AT&T average closing stock price is below $37.41, Time Warner shareholders will receive $107.50 per share, split evenly between cash and stock ($53.75 each) at the equivalent of 1.437 AT&T shares. If AT&T’s average closing stock price is above $41.34, Time Warner shareholders receive the equivalent of 1.3 AT&T shares.
CenturyLink Acquires Level 3 Communications
CenturyLink, the company that had swallowed up Embarq and then Qwest Communications in 2010, both for around $12 billion apiece, announced in late October 2016 that it would be acquiring Level 3 Communications for roughly $34 billion.
In turn, as a way to fund a portion of the acquisition of Level 3’s global footprint, CenturyLink announced in early November that it will be selling off almost 60 data centers at an anticipated net gain of $2 billion.
Verizon Acquires Yahoo
A number of news reports from mid-2016 stated that Verizon had acquired Yahoo for around $4.8 billion, but that was prior to revelations that over 1 billion Yahoo accounts had been compromised, but never disclosed, several years ago.
The Yahoo name itself may not survive the acquisition, as Yahoo recently changed its name to Altaba. It plans to retain over a one-third stake in Yahoo Japan, as well as the 15 percent stake of Alibaba, which Yahoo has owned for a number of years. In essence, Altaba will become a holding and investment company while Verizon picks up the remaining assets and, potentially, retains the Yahoo name.
Yahoo CEO Marissa Mayer has also resigned from Yahoo’s board of directors, along with five other board members, as the new company shrinks to a total of five directors.
Whether the $4.8 billion acquisition price will remain intact remains to be seen, with rumors flying that Verizon will ask for a discount on the price agreed to in the July 23, 2016, stock purchase agreement. TechCrunch, which is owned by Verizon by way of AOL, states that Verizon may very well announce a discounted price before the merger is completed.
Yahoo acknowledged these risks, among others, in the 8K filing in which the company changed its name: “Potential risks and uncertainties include, among others ... risks that Verizon may assert, or threaten to assert, rights or claims with respect to the Stock Purchase Agreement,” the 8K states, “as a result of facts relating to the security incidents disclosed on September 22, 2016 and December 14, 2016 and may seek to terminate the Stock Purchase Agreement or renegotiate the terms of the Sale Transaction on that basis.”
But Wait, There’s More
We’ve only scratched the surface of 2016 mergers and acquisitions.
Other notable transactions that we don’t have the space to expand on include Accedo’s acquisition of Digiflare; Adobe’s acquisition of both Livefyre and TubeMogul; Ericsson’s purchase of FYI Television; Nielsen’s acquisition of both Gracenote and VisualDNA; Piksel’s acquisition of Lingospot; Snapchat snapping up Cimagine; and Taboo acquiring ConvertMedia.
What does 2017 hold in store? First and foremost, we hope it holds a significant amount of new innovation. A number of industry entrepreneurs are now flush with cash because they were sold to a larger media company, and we hope a few of them will use their new resources to focus on several of the outstanding major issues that still plague the industry. Latency, anyone?
OTT and, to a lesser extent, HEVC will also continue to generate headlines in the M&A space in 2017, as will a second round of consolidation in advertising platforms. Workflow companies will get more scrutiny as well, since the infrastructures are now in place for TV-sized audiences, but automation has lagged in the media and entertainment space, with broadcast master control companies slow to add in true workflow automation for OTT prep and delivery.
Finally, we expect to see at least one additional merger of a core infrastructure provider with a premium content owner, but perhaps this one will be a content owner buying the necessary pipe to make his OTT dreams a reality.
Whatever 2017 holds, Streaming Media will keep you up-to-date on the latest merger and acquisition news, as well as offer our analysis of what key M&A activity means for your business.
This article appears in the March 2017 issue of Streaming Media magazine.
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