WSJ report: Pay TV mergers will trigger media consolidation

With the top four pay-TV services seeking regulatory approvals to combine into just two companies, the major media conglomerates are seriously pondering their own unions to offset what could be an advantage in bargaining power.

That is the theory put forth Monday by the Wall Street Journal, which says that after years of hunkering down and focusing on shareholder returns, the major content suppliers are seriously pondering their own synergistic weddings.

Speaking to analysts and industry executives, the WSJ says that smaller channels, such as AMC and Food Network will look to join larger conglomerates, seeking for more distribution leverage amid a consolidated pay TV landscape.

The paper also mentioned Spanish-language broadcaster Univision, whose owners have already had talks with CBS and Time Warner Inc. about a sale that could be valued at more than $20 billion.

Another recent example: In May, 21st Century Fox signaled its intent to form a joint venture with private equity firm Apollo Global Management, combining the Fox-owned Shine Group and the Apollo-controlled Endemol and CORE Media Group.

With AT&T (NYSE: T) suggesting to federal regulators that its proposed purchase of DirecTV (NASDAQ: DTV) could reduce its programming costs by as much as 20 percent, it's hardly an out-there hypothesis.

The WSJ cited other forces beyond the proposed AT&T/DirecTV and Comcast/TWC mergers as moving media conglomerates to gobble up more assets. With the U.S. pay TV market having reached a "plateau," it says, operators will be looking to drive harder bargains as they try to maintain margins.

The TV ad market is another cited factor, having shrunk 0.1 percent last year, according to Kantar Media. 

For more:
- read this Wall Street Journal story
- read this Deadline Hollywood story

Related links:
AT&T promises FCC cheaper cable, more rural broadband, net neutrality compliance
AT&T says DirecTV deal will reduce programming costs by 20%
Moffett: AT&T-DirecTV deal will get done, but not without regulatory 'perspiration'

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