The Biggest Streaming Media Mergers and Acquisitions of 2015
From A(OL) to V(erizon) we look at the mergers and acquisitions that mattered in the last year. Here's a look back, with an eye toward what they portend for the future.
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All types of media saw significant consolidation in 2015, reinforcing and accelerating a trend that started in 2014. Whether it was Amazon acquiring the Washington Post, or Verizon picking up AOL, 2015 was a banner year for old and new media to morph in to mobile- and video-centric media.
Looking at the big picture, the number of mergers and acquisitions in three key spaces—digital media, information, and technology—increased almost 25 percent in the first 6 months of 2015 compared to the same period for 2014.
According to investment bank Coady Diemar Partners, “the total number of these deals increased to 1,243 in the first half of 2015, up from 1,000 during the same period in 2014” but the value of mergers and acquisitions overall fell by almost 23 percent year over year to just shy of $100 billion. The company says this is “primarily due to a decrease in the number of deals equal to or greater than $1 billion.”
Let’s look at the top mergers and acquisitions for 2015 in digital media, and their bearing on the streaming media landscape.
[Editor's Note: You'll note that two of the biggest acquistions of 2015 aren't mentioned in this article. Click the links to read our coverage of Amazon Web Services' purchase of Elemental Technologies for a reported $500 million and Ericsson's acquisition of Envivio for $125 million.]
Verizon Acquires AOL, Which Acquires Millennial
This string of mergers reshaped the landscape in a small way, or at least gave AOL another lease on life. The once-infamous internet service provider was almost as well-known for its annoying past marketing tactics as it had been for the ill-fated merger more than a decade ago that saw it placed under the Time Warner umbrella until saner heads prevailed.
So bad was that initial merger that a Fortune columnist mentioned it last year as a classic example of the transient advantage.
“The business was up against a phenomenon I refer to as transient advantage,” wrote Rita Gunther McGrath, a Columbia Business School professor of business strategy. According to McGrath, the transient advantage is, well, fleeting, “namely when a combination of capabilities that at one point made a firm a leader, erodes and is replaced by the next form of competitive advantage.”
McGrath pointed out that AOL’s online presence was strong, in fact stronger than any presence that Time Warner had been able to build, so the merger made initial sense. That might be a warning to Verizon, though, as its acquisition of AOL, completed in mid-2015, was pitched as a way to allow Verizon to push much more rapidly into the realm of over-the-top (OTT) and mobile video content.
“This acquisition supports our strategy to provide a cross-screen connection for consumers, creators and advertisers to deliver that premium customer experience,” Lowell McAdam, Verizon chairman and CEO, said in a prepared statement.
“We are excited at the prospect of charting a new course together in the digitally connected world,” McAdam said. “At Verizon, we’ve been strategically investing in emerging technology, including Verizon Digital Media Services and OTT, that taps into the market shift to digital content and advertising. AOL’s advertising model aligns with this approach, and the advertising platform provides a key tool for us to develop future revenue streams.”
With the ink barely dry on the AOL-Verizon deal, AOL itself announced that it was acquiring Millennial, a mobile ad platform that AOL hopes to use to augment its own digital mobile ad platform offering. Millennial had stayed independent, then gone through its own IPO in 2012 before acquiring a number of small mobile ad platforms. While the company had raised $130 million and was briefly valued at around $2 billion, it fell prey to industry consolidation. AOL’s final purchase price of Millennial was just over $200 million, when the acquisition was completed in late October 2015.
Verizon presented its acquisition of AOL as a way to push more rapidly into OTT and mobile video.
Intel Acquires Altera
The semiconductor market is continuing to consolidate, with Intel chipping away at semiconductors for key market verticals.
Intel (INTC) announced its intention to acquire Altera (ALTR) on June 1—the latest example of semiconductor industry consolidation. Intel plans to pay $54 a share for Altera—the company’s biggest acquisition ever and under the reins of CEO Brian Krzanich. The Wall Street Journal billed the purchase as a major bet on the Internet of Things (IoT), as well as data centers and media delivery chipsets.
Intel is “effectively betting $16.7 billion—equal to its entire cash pile and then some—on its ability to combine its technology with Altera’s to create a new class of chips,” The Wall Street Journal reported in June 2015. This came just a few months after NXP acquired Freescale, another company that made wireless communications devices and some video-centric chips, for $11.5 billion.
Western Digital Buys SanDisk
This might not seem like a natural fit for this article, but Western Digital has long been interested in media delivery. What better way to further its push into both the acquisition and delivery of media than to acquire the premier nonvolatile memory (NVM) storage provider, SanDisk?
“Western Digital and SanDisk’s complementary product lines, including hard disk drives, solid-state drives, cloud datacenter storage solutions and flash storage solutions, will provide the foundation for a broader set of products and technologies from consumer to datacenter,” according to a Western Digital press release.
It’s not yet a done deal, and the acquisition is subject to shareholder approval in mid-2016, but with more than 15,000 combined patents issued or pending worldwide, the combined company could own a significant share of the online and offline storage market.
Indeed, while the acquisition has been approved by the boards of directors of both companies, the price is still undetermined, due in large part to a prior announcement of an investment into SanDisk by Unisplendour Corporation Limited.
“If the previously announced investment in Western Digital by Unisplendour Corporation Limited closes prior to this acquisition, Western Digital will pay $85.10 per share in cash and 0.0176 shares of Western Digital common stock per share of SanDisk common stock,” a Western Digital spokesperson says. “If the Unisplendour transaction has not closed or has been terminated, $67.50 in cash and 0.2387 shares of Western Digital common stock per share of SanDisk common stock.”
Western Digital shored up its media delivery and acquisition efforts with its acquisition of SanDisk.
Cisco and Ericsson Team Up
Not be outdone in the IoT space, Cisco and Ericsson announced a major partnership in late 2015.
The intent is to combine Cisco’s product line of data center and media-centric hardware with Ericsson’s massive service organization. The aim is to generate more than $2 billion in new revenue by 2018, split evenly between the two companies.
According to a blog post by Streaming Media’s Dan Rayburn, “the announced partnership aims at modernizing their broadband, TV and cellular networks to accommodate soaring OTT video consumption and combat new services like Google Fiber and Netflix. It also positions them well in the long run to serve demand for 5G wireless networks.”
Measure Twice, Report Once: ComScore and Rentrak
In the last month of 2015, ComScore and Rentrak, both listed on the NASDAQ, announced a definitive merger agreement in a stock-for-stock merger.
The idea behind the merger, which closed in early 2016, is a combination of ComScore’s digital audience and advertising solutions analytics alongside Rentrak’s census-based worldwide movie and video-on-demand measurement tools.
The combination will, according to the companies, “provide a more complete picture of the way people consume media today and in the future” as the combined organization can measure and analyze on a scale perhaps unmatched in today’s streaming media and over-the-top (OTT) industry.
Whether this is another transient advantage play is yet unknown, although the company spokespeople say the combination will “possess a unique breadth of knowledge, experience, expertise, and skill sets that cannot be duplicated” at this point.
ComScore acquired Rentrak’s census-based movie and VOD measurement tools to complement its own digital audience and advertising analytics.
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