Kings of content

Pay TV operators, mobile providers and tech giants are all investing in content assets, and there is a lot to play for, writes Kate Bulkley

Belgium  is home to many fine achievements – Hercule Poirot and Hergé’s Adventures of TinTin among them – but breakthrough moments in modern-day television business practices? Surely not.

And yet that is exactly what is happening if you look closely at local cable company Telenet’s recent 50% acquisition of programme maker De Vijver Media – which says a great deal about what is happening right now in terms of media consolidations and the newly-appreciated power of content generally.

Telenet’s primary business is selling fast pipes and bundles of communications services and CEO John Porter admitted in June the move was “not an obvious step for a cable company.” He made the decision because he believes that the strength of his cable TV service will be significantly strengthened by putting money into local  content as well as offering bundles of communications services. And it turns out he’s not alone in thinking that way.

Telenet’s move is starting to be mirrored elsewhere. And there is good reason. The media landscape has always been a competitive battleground, but the game has ramped up with the rise of subscription VoD services like Netflix, the growing savvy of big telcos offering IPTV services and the rise of internet video with YouTube an outstanding example.
David Abraham, the CEO of Channel 4 in the UK, recently told the audience at the Media Guardian Edinburgh TV festival that TV programming “is clearly now a combat vehicle for tech and mobile companies and platforms to compete with each other, rather than a sovereign industry in its own right.”

Certainly the speedy take-up of connected devices has given consumers a choice like never before about what and when and how they watch video. Clearly the media business is undergoing a sea change and the incumbents, including pay TV operators, are trying to stay relevant while the newcomers are working hard to grab market share.

This is a time of intense media consolidation and there is a particular focus on content assets, with production companies being snapped up by other production companies as well as by broadcasters like ITV in the UK.

Rupert Murdoch’s 21st Century Fox and private equity firm Apollo Global Management announced they are in the process of creating a global production powerhouse by combining the Shine Group, maker of The Biggest Loser, with Big Brother producer Endemol and Core Media, the maker of American Idol. The plan is to put them all together under a new joint venture company. Murdoch (both Rupert and son James) can also be seen behind the plan by BSkyB to create Sky Europe: a rolling together of Sky Italia, Sky Deutschland and BSkyB under one big, pan-Euro umbrella. The combined programming budget of the new entity will be a cool £4.6 billion (€5.8 billion) and will allow the “coordination” of sports, co-production possibilities and even pan-European channel launches.

BSkyB has already pledged to invest £600 million in British programming, commissioning high-end, award-winning series like The Tunnel. Sky Italia has commissioned an original mafia series called Gomorra, while Sky Deutschland greenlit its first-ever original drama series in February based on comic book Diabolik and also announced in March its first-ever co-production in 100 Code.

Liberty Global also surprised many by teaming up with Discovery Communications in May to purchase the largest UK independent producer and maker of Midsommer Murders, All3Media, for a reported £500 million. Liberty already owns the UK’s only cable company Virgin Media and clearly now sees “strategic content acquisitions” as a key part of its plans going forward.

Not all have been thrilled by the latest developments. Channel 4’s Abraham worries about the creative future for UK companies purchased by US media companies. He says they are buying up creative assets in the UK “to stay ahead of each other by internationalising their revenues, priming their distribution pipes and shielding their tax exposure.”

That is all pretty bang on, but content is the new “weapon” that has also piqued the interest of non-US players. Vincent Bolloré, the new chairman and 5% shareholder of Vivendi, is keen to focus on media and entertainment, recently selling off Vivendi’s stakes in Maroc Telecom, French mobile player SFR and video games producer Activision Blizzard, yielding a war chest of over €10 billion. The possible sale of its Brazilian broadband firm GVT to  Telefónica would give it even more financial firepower and Bolloré is reportedly interested in assets including several US companies with a global footprint, including Scripps Networks Interactive and AMC Networks.

It’s an interesting – and potentially lucrative – time to own content assets. There is a lot to play for. Lending rates are attractive and the market likes the “content story” of the big media players. This is a story that has more distance to run.

Kate Bulkley is a broadcaster and writer specialising in media and telecommunications. [email protected].