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cc Wednesday, December 20, 2017 latimes.com/news

After Disney-Fox, who’s next? Huge deal may force smaller media firms to grow or struggle

By MEG JAMES AND RYAN FAUGHNDER TIMES STAFF WRITERS alt Disney Co.'s block- buster deal to buy W much of 21st Century Fox revealed Rupert Murdoch's fear that his media company was not strong enough to survive the digital onslaught — raising questions about how even smaller media com- panies will weather the storm. Since Disney clinched its $52.4- billion deal last week to buy some of Murdoch's most lucrative assets, many wonder which media compa- The entrance of the Metro-Goldwyn-Mayer offices in Santa Monica offices. nies might be next. MGM is among smaller media companies that are considered prime targets for The scramble to bulk up is likely acquisition. (Nick Ut / Associated Press) to force medium-sized players to strike their own deals out of con- nies to sell," predicted Ken Klein- "This is clearly an arms race and cern that they need to grow or get berg, a veteran enter- these companies need to step up left behind as tech giants like - tainment business lawyer. "If com- their game," said Lloyd Greif, a Los gain more power in Hollywood. panies like Fox are worried, what Angeles investment banker. "We are Pictures Entertainment, are they waiting for?" going to see more creative, accretive CBS Corp., Inc., Liberty The Disney-Fox deal is just the strategic acquisitions — and acqui- Media Corp., and Metro- latest combination. Earlier this year, sitions of intellectual property such Goldwyn-Mayer suddenly look like Discovery Communications an- as libraries." bantamweights among the big behe- nounced a marriage with Scripps moths. Networks Interactive, which owns Here's a look at some possible mer- "There's going to be considera- HGTV and Food Network. Expect ger scenarios: ble pressure for the smaller compa- more deal-making to come. CBS also could be a buyer. In the The Beverly Hills studio is re- past, Chief Executive Leslie Moon- turning to the business of distrib- Viacom ves had his eye on — uting its own domestically The most obvious corporate pair- but that studio's Japanese parent through a joint venture with Megan ing, many analysts say, would be company made it clear that it wasn't Ellison's . CBS and Viacom Inc. because both interested. Now, CBS may consider MGM's resurgent business has are controlled by the Sumner Red- buying AMC Networks, home of also benefited from a fast-growing stone family. Shari Redstone, the "The Walking Dead" and "Better TV arm, which produced the Emmy ailing mogul's daughter, now is the Call Saul" or uniting with Lionsgate Award-winning streaming hit "The chief decision maker. Last year, she or MGM. Handmaid's Tale" for . favored a plan to rejoin the two Verizon, CBS and Viacom de- Some analysts and bankers be- companies (they were separated in clined to comment. lieve that MGM and Lionsgate

2006), but she abandoned the effort might be acquired by John Malone's when CBS balked at the price that Lionsgate . Another scenario: Viacom's board was seeking for Known for franchises such as CBS could scoop up both studios Viacom's shares. "The Hunger Games" and TV shows along with Viacom's Paramount Pic- Since then, Viacom has contin- including "Orange Is the New tures. ued to confront declining ratings at Black," Lionsgate has long been Still, neither Lionsgate nor MGM MTV and Comedy Central and viewed as ripe for the picking. appears eager to sell, at least for struggled to maintain premiums on "I think Lionsgate is the next at- now, bankers said. the fees it charges pay-TV providers tractive target," Greif said. "I don't think anyone's ready to for the rights to carry its channels, Sony could use Lionsgate to bol- go home yet," said one banking including Nickelodeon. ster its and TV business. Alter- source who was not authorized to "What does Shari do? She looks natively, a telecom provider such as speak publicly and asked to remain like a small fry and the family has Verizon could use it to jump-start its anonymous. badly lagged the market in wealth content business and create original Representatives for MGM and creation over the decade," said me- video to entice mobile service cus- Lionsgate declined to comment. dia analyst Michael Nathanson. Via- tomers. Sony com's shares have fallen more than Recently, the Santa Monica stu- As Disney gains clout, expect 60% in the last five years, and cur- dio has been a buyer, rather than a Sony Pictures Entertainment to rently hover around $31 a share. seller. The studio acquired cable make a move of its own. Sony's film By contrast, CBS is stronger be- network last year for $4.4 bil- studio is trying to rebound but still cause its flagship network is viewed lion to build the latest media power- ranks fifth among the major studios as must-have programming. It also house. in domestic market share. has been more aggressive about ex- The Culver City studio made panding its CBS All Access stream- MGM management changes in the last year, bringing in former Fox execu- ing service with original content, MGM, which has been growing tive Tony Vinciquerra as its new including "Star Trek: Discovery." under the leadership of Gary Barber chairman and chief executive in There also has been speculation since its 2010 bankruptcy reorgani- June to replace outgoing Michael that mobile phone giant Verizon zation, is also the subject of much Lynton. Last summer, it revamped Communications might be interested deal-making conjecture. in buying CBS. its television team when two top lators frowned on the deal, which for Time Warner Inc., which owns programmers defected to Apple. abandoned. CNN, HBO, TNT, the Cartoon Net- "The entertainment industry is in Meanwhile, Comcast also has work and the Warner Bros. film and a time of consolidation," Vinciquer- been growing its high-speed internet TV studio in Burbank. Last month, ra wrote in a note to his staff last service and pushing into mobile the U.S. Justice Department sued to week. "In this climate, studios will phone service through a partnership block the deal. either grow or become a target for agreement with Verizon. Comcast A federal judge has set a March acquisition. … It is my goal to do could buy Viacom's international 19 trial date for the government to the former, not the latter." television networks in Britain and present its case. The outcome will Potential acquisition targets India, or move more heavily into either chill the market for mergers could be MGM, Lionsgate or a com- phone service. or invite a further frenzy. pany with channels. "The question is, do these deals Sony could also strike a partnership New Fox get done," asked one high-level me- to provide programming to the Fox If regulators approve the sale to dia executive. broadcast network. Disney, the Murdoch family will be

left with a slim portfolio that in- Apple et al. Comcast cludes Fox News Channel, Fox Tech giants such as Apple, Face- The Philadelphia pay-TV and Business Channel, Fox Sports 1, book and Google have the financial Internet service giant is one of few Fox Sports 2 and the Fox broadcast clout to buy major media players, companies with the balance sheet network. and all have made serious moves to needed to pull off a big-ticket trans- Some analysts believe the re- create original programming that action, but its ambitions have been maining company might not survive they can deliver directly to viewers thwarted. on its own, and could buy other TV through their own streaming plat- Comcast triggered the current station groups such as Tegna. Others forms. wave of consolidation when it are betting that Murdoch will even- But for now, the companies seem bought media company NBCUni- tually recombine the Fox assets with more interested in building their versal in 2011. Last year, Comcast the publishing company his family own content operations to make TV acquired DreamWorks Animation controls — News Corp. That entity shows and short-form programming studios to bolster Universal's pres- owns such newspapers as the Wall and finding new ways to get con- ence in animation. Comcast Chair- Street Journal, New York Post and sumers to spend more time on their man and Chief Executive Brian Times of London. devices. Roberts even tried to engage Mur- Murdoch didn't rule out such a "I don't think these technology doch in merger talks — but the mo- merger last week in an interview companies will acquire Hollywood gul didn't bite. with the Fox Business Network production or studio capabilities," What Comcast lacks is a national when he said: "Ideally, , but I said Susan Bidel, a senior analyst footprint. Its subscriber base in- think that's years away." with Forrester Research. "They rec- cludes only about a third of the ognize that it would be outside their country. Comcast three years ago Time Warner core competencies — and a huge attempted to buy Time Warner Ca- It's been nearly 14 months since distraction." ble to extend its reach to Los Ange- Dallas telecommunications giant les, New York and Dallas. But regu- AT&T unveiled its $85-billion bid