Report: Media & Telecom Sector Adapts To Disruptions

Despite the pandemic that continues to hobble many media and telecommunications companies, mergers and acquisitions continued in 2020 at nearly the pace of the previous year, making it one of the “more resilient” sectors of the economy, according to Forbes citing a new report by consulting firm PwC.

“Despite unprecedented challenges, deal activity in the Media & Telecommunications sector continued at nearly the same pace as 2019, with 612 deals in the past 12 months marking just a 4% decline, while announced deal value increased by 8 percent.”

After a “virtual standstill” in the pandemic’s first weeks, activity picked up, peaking in summer and early fall, according to the report. In all, those 612 deals totaled $99 billion in value.

The deals are continuing, too, even amid a deadly resurgence of the pandemic as winter settles in. On Wednesday, concluded a long-rumored deal, selling anime streaming service Crunchyroll to Sony, which already owns competitor Funimation, for about $1.1 billion.

The Crunchyroll sale comes as the telecom giant pays down more than $150 billion in debt, invests in its 5G mobile network and dramatically restructures its WarnerMedia entertainment unit for a streaming-video future centered around HBO Max.

PwC predicted other consolidation is on the way, as big companies focus on their digital strategies, and struggling smaller companies consider consolidation opportunities to scale up and better compete against digital giants.

Of note, private-equity investments continued to grow in 2020, building on a two-year-old trend. This year, private equity investments represented 34 percent of deal volume, up from 2019’s 28 percent.

Looking forward, the report noted uneven performance across the broad sector, with a “K-shaped” recovery ahead, as some subsectors continue to thrive while others face a slow return to normal at best.

Subsectors such as podcasting, OTT services, cloud- and app-based services, game publishing, and digital publishers are thriving in the lockdown era, and becoming attractive acquisition targets as PwC predicted they’ll continue to be a key part of consumer entertainment sources for the future. .

The big question for streaming video, music and game services is how fast wireless carriers can build out their 5G networks, a process costs many tens of billions of dollars over the next few years. When those high-speed, low-latency networks are largely omnipresent for much of the market, equally omnipresent entertainment services will be positioned to thrive as well.