Why AT&T-Time Warner Deal Could Kickstart More Big Media Mergers

AT&T’s $85 billion acquisition of Time Warner has put entertainment companies under a much brighter spotlight, as the new wave of distributors battle for ownership of content in a constantly expanding and evolving media universe — with one major player freshly off the market.

The healthy premium AT&T paid — 36 percent higher than Time Warner’s Oct. 19 closing price and a 66 percent markup over where the stock was at the start of the year — could entice more media companies to come to the table, making it the first domino in a series of potential entertainment M&A deals.

“What we saw over the weekend is a continued convergence and consolidation across sectors which we’re seeing in entertainment and media and technology,” Todson Page, the U.S. Technology Deals Leader at PwC, told TheWrap.

[...] on Tuesday’s conference call following Apple’s fiscal fourth-quarter earnings, CEO Tim Cook opened the door for purchases in the company’s not-too-distant future.

Apple has a cool $238 billion in cash, more than the market cap of Disney and Netflix combined, and other tech companies are also resource-rich, Page said.

Snap Inc. — parent of Snapchat — is a unicorn with a growing number of media partnerships, and after raising more than $2.6 billion in venture capital it would appear to have the resources to make a major entertainment purchase.

AT&T’s scoop might also incentivize Chinese buyers — which have been plenty aggressive in acquiring entertainment assets, particularly the Dalian Wanda Group — to lock down even more content.

According to a senior executive at a Chinese studio, the prime motivation is to leverage content rights to entice new subscribers to their streaming services and other products.

In a three-day span earlier this month, members of Congress asked two separate government agencies to take a look at the flurry of acquisitions of U.S. companies by Chinese firms — especially Wanda — and the Washington Post published an op-ed arguing that “it is not far-fetched to assume that China would seek to spread pro-regime propaganda via ownership of U.S. entertainment media.”

[...] even if China’s ambition gets curbed for political reasons, with so many deep-pocketed potential purchasers out there, content creators should be increasingly in the crosshairs of big guns targeting acquisitions.