What's ripe for acquisition in the media sector
A BusinessWeek column by Jon Fine ("The Merger Frenzy Explained," 5/2/107) reacts to the proposed media deals in the air and tries to determine why some properties are hot and some are not.
The deals in question include possible link-ups of News Corp. and Dow Jones, Thomson and Reuters, Microsoft and Yahoo, and Gannett with employment site Monster.com. As Fine points out, the history of media deals is pretty spotty:
Considering the billions of dollars squandered in past deals that chased a mirage of synergy, it pains me to write the following sentence. The performance of News Corp. (stock up about 40% in the last two years) and Disney (up 34%) show that the markets like big, multi-platform combinations of content and distribution than almost anything in media, especially when they're paired with a new media (hello, MySpace!) the Street prefers.
The other reasons the acquirees become vulnerable is simply weak performance. Dow-Jones and Yahoo are particularly weak. Dow Jones is a hoarder of content, but has done less with it than others. Yahoo has command of lots of eyeballs, but is losing badly to Google. Above all, it the combination of stockpiled, copyrighted information and an up-to-date interface with users that is the rage.
Fine predicts that the next big move may be made by Viacom, which may be on the prowl for better electronic distribution of its content (TV, Paramount movies). On the other hand, as Fine points out, that's the story behind the disastrous AOL-Time-Warner.
