Deals That Shook Up Entertainment in 2023 & Trends To Watch Out For


Contributing Author: Corey Martin

Despite limited deal volume, 2023 has been nothing short of transformative for the media and entertainment industries, marked by large, groundbreaking transactions that have sent shockwaves across the landscape. From tech giants entering the gaming arena to significant shifts in ownership of entertainment powerhouses, the sectors continue to undergo a dynamic evolution. In addition to these headline-grabbing deals, several key trends are emerging, shaping the future trajectory of media and entertainment.

This article dives into the deals that have shaken up the industry and explores the trends that will be crucial to watch in the coming year.

Pivotal Deals Reshaping the Media and Entertainment Landscape

Let’s dissect the transformative impact of seven key deals, each poised to leave an indelible mark on the trajectory of media and entertainment.

Microsoft
MSFT
-Activision
ATVI

ATVI

Microsoft’s $68.7 billion acquisition of Activision Blizzard positions Microsoft among the largest gaming companies in the world. In acquiring major franchises like Call of Duty and World of Warcraft, and expanding Xbox Game Studios, Microsoft emphasizes its commitment to community-driven gaming experiences. The addition of Activision Blizzard’s franchises to Xbox Game Pass is set to reshape the gaming subscription landscape. However, regulatory battles involving the FTC and CMA in the US and UK have underscored the complexity of the acquisition. Despite these challenges, the future promises a groundbreaking journey that will redefine interactive entertainment in the gaming industry.

UFC-WWE

The merger of UFC and WWE into TKO Group Holdings, valued at $21.4 billion, marks a seismic shift in sports and entertainment. Trading on the New York Stock Exchange, the company, 51% owned by Endeavor and 49% by WWE shareholders, transcends the boundaries of combat sports. Led by CEO Ari Emanuel and Executive Chairman Vince McMahon, TKO envisions acquisitions, international expansion, and groundbreaking direct-to-consumer options, poised to reshape the global sports and entertainment landscape.

Disney+-Hulu

Disney’s consolidation of Disney+ and Hulu, fueled by the acquisition of Comcast’s
CMCSA
33% stake in Hulu for approximately $8.61 billion, marks a strategic response to the evolving streaming landscape. As Disney prepares to own Hulu outright, it positions itself with ownership of two major streaming services catering to distinct audiences. The merger, set to be completed by 2024, anticipates a unified streaming app offering standalone options for both Hulu and Disney+ while also exploring bundle deals. While this move enhances Disney’s streaming objectives and consolidates content, concerns arise about potential price hikes and reduced competition in the streaming market. As Disney continues its acquisition streak, including major brands like Pixar, Marvel, Lucasfilm, and 20th Century Fox, the approach to handling Hulu’s unique brand identity and content offerings remains a focal point for industry watchers.

Lionsgate Entertainment-Entertainment One

Lionsgate Entertainment’s acquisition of Entertainment One for approximately $500 million signifies a strategic expansion of its content portfolio and global reach. The deal adds 6,500 titles to Lionsgate’s library, reinforcing its presence in scripted and unscripted television while extending its footprint in Canada and the UK. The acquisition, reflecting the ongoing trend of consolidation in the middle market, positions Lionsgate as a major independent content platform. The move undoubtedly enhances Lionsgate’s competitiveness in the evolving entertainment landscape, emphasizing the value of robust content libraries and diversified distribution capabilities.

Quality Control Music-Hybe

Quality Control Music’s integration into the HYBE ecosystem, led by HYBE America’s CEO Scooter Braun, mirrors a groundbreaking shift in the music industry’s landscape. The $320 million deal not only positions HYBE as a dominant global entertainment giant but also signifies a harmonious convergence of music and technology. As this transformative collaboration continues to take shape, music fans can anticipate innovative approaches to artist development, content creation, and fan engagement. The unique blend of talents, with Lil Baby, Migos, City Girls, and Lil Yachty among its roster, cements Quality Control’s status as a cultural phenomenon. This strategic maneuver by Braun, in his inaugural major move as HYBE America’s sole CEO, showcases a commitment to amplifying diverse voices and pushing the industry’s creative boundaries. Disclosure: I served as transaction counsel in the Quality Control Music-HYBE deal.

Fanatics Betting-PointsBet

Fanatics Betting and Gaming’s completion of the acquisition of PointsBet’s US business in eight states, with an initial payment of $175 million, marks a pivotal moment in the intersection of sports, betting, and media. The rebranding to “PointsBet, a Fanatics Experience” reflects a strategic emphasis on customer-centric initiatives. This move not only accelerates growth but also diversifies offerings by integrating PointsBet’s online casino platform and Banach Technology’s risk management platform into the Fanatics Sportsbook app. The deal sets the stage for immersive fan experiences, reshaping the landscape of sports entertainment and the sports betting industry.

ESPN-PENN Entertainment

Another high-profile transaction in the sports betting sector is the alignment between PENN Entertainment and ESPN, making PENN the exclusive sports book partner for ESPN and resulting in the creation of ESPN Bet. In a deal valued at $2 billion (with PENN paying ESPN $1.5 billion over the partnership’s initial ten-year term, plus warrants to purchase $500 million in common shares of PENN), the strategic partnership is notable because it represents Disney’s initial foray into sports betting, an industry sector that Disney CEO Bob Iger indicated was not an arena that he saw as compatible with the Disney brand back in 2019. The other intriguing aspect of the ESPN-PENN partnership will be its long-term implications on online and mobile sports betting nationwide, as ESPN Bet will initially launch in 16 states and inevitably expand over the course of the partnership, as online wagering is legalized in additional states.

Emerging Forces: Anticipating Trends Defining Media and Entertainment in 2024

This past year has not only witnessed groundbreaking deals but has also set the stage for transformative trends that are reshaping the media and entertainment industry and demanding our attention.

Continued Antitrust Enforcement

Antitrust enforcement remains a driving force in the industry, shaping the competitive landscape and influencing strategic decisions. As regulatory bodies scrutinize major deals, companies face the challenge of navigating complex legal frameworks. The Microsoft-Activision deal, with ongoing regulatory battles, exemplifies the intricate dance between corporations and antitrust regulators. This trend is likely to persist, impacting the structure of future deals and fostering an environment of cautious maneuvering.

Continued Consolidation in the Middle Market

The trend of consolidation in the middle market continues to gain momentum, with companies seeking to bolster their content portfolios and expand global reach. Lionsgate Entertainment’s acquisition of Entertainment One stands as a testament to this ongoing consolidation. As companies strive to become major independent content platforms, we can anticipate more strategic acquisitions that redefine the competitive landscape.

Impact of Decreasing Interest Rates

As the media and entertainment industry readies for the year ahead, a notable factor on the horizon is the prospect of decreasing interest rates and its potential influence on transactional activity. This anticipation is set to shape M&A trends with expectations of lower borrowing costs and increased financing accessibility – a move poised to accelerate the ongoing consolidation in the middle market, echoing strategic moves such as Lionsgate Entertainment’s acquisition of Entertainment One.

Public Companies Going Private

Silver Lake’s recent proposal to take entertainment giant Endeavor private highlights a trend in which public companies shift ownership for strategic flexibility and reduced scrutiny. Endeavor, facing challenges of undervaluation, is evaluating alternatives, signaling a broader shift in industry dynamics. As Silver Lake, the major shareholder with 71% voting power, plans a privatization proposal, this trend of public-to-private transitions reshapes the landscape for talent and media companies, showcasing the strategic considerations involved.

Implications of the SAG, WGA “Double Strike”

The double strike by the Screen Actors Guild and the Writers Guild of America introduced multifaceted implications for the industry. Beyond the immediate concerns of potential smaller budgets for prestige television and blockbuster films, the strike’s ripple effects extend to the realm of artificial intelligence in future productions. The industry is at a crossroads, balancing the demands of creative talent with the financial constraints imposed by underperforming projects.

Stalled Subscriber Growth for High-Profile Streaming Services

Streaming services like HBO Max, Disney+, and Paramount
PARA

PARA
Plus, all of which once experienced exponential growth, are now grappling with stalled subscriber numbers. The impact of this slowdown reverberates across the industry, influencing content investments and strategic decisions. The tension between maintaining profitability and investing in future content remains a central challenge for these high-profile platforms.

Tensions for Large Public Entertainment Conglomerates

Large public entertainment conglomerates, including Disney, Warner Media, and Paramount, face a delicate balancing act. The pressure to stimulate share price growth through divestitures, acquisitions, or consolidation, driven by activist investors, contrasts with the imperative to invest in future growth. The decisions made by these conglomerates will significantly shape the industry’s trajectory in the coming years.

From legal battles to strategic shifts in ownership, the industry’s landscape is evolving, and the trends outlined here are crucial indicators of what lies ahead.


Corey Martin is a Managing Partner and Chair of Granderson Des Rochers, LLP’s Entertainment Finance Practice. In this role, Corey oversees all corporate transactional matters involving the firm’s clients, which consist of companies and talent across the music, film, television, digital media, sports, and technology industries.



Source link