In the first half of this year, the value of deals in the media and entertainment sector grew almost 440% from the first half of 2017. According to The New York Times, the value of deals in the sector grew from US$60.3 billion in 2017 to US$323 billion in 2018.
While most of the largest media mergers this year have been in the broadcasting sector, news publishing industry has not lacked in activity either — and there are likely more deals to come.
In Britain, Johnston Press, which owns more than 200 regional and local news titles in the country, including the Scotsman, announced the company is for sale after failing to secure refinancing. In the United States, speculation continues about the McClatchy-Tribune Publishing deal. McClatchy owns more than 30 newspapers in 14 states, and Tribune’s news brands include the Chicago Tribune and the Baltimore Sun, among other newspapers. Recently, Ken Doctor of Newsonomics noted the emergence of the McClatchy-Tribune deal “opens up an array of fascinating scenarios for the fast-paced consolidation of daily newspapering amid its continued business downturn.”
In Australia, a merger between broadcasting company Nine Entertainment and Fairfax Media (one of the largest news publishers) is waiting for the competition authority’s clearance. In New Zealand, the merger between two of the biggest print and online news publishers, NZME and Stuff, was turned down for the third time in September. In October, the companies confirmed they are not taking their case to the Surpeme court after a two-and-a-half-year campaign to gain approval for it.
The merger was turned down by the Commerce Commission, the High Court, and the Court of Appeal. While the Commerce Commission and the courts accepted the merger would create “economic efficiencies,” they ruled these were “outweighed by the losses of quality and plurality” in the local media market.
The New Zealand merger ruling proposes scale is not the only thing that matters in the media market, although some may disagree. In a recent interview, 21st Century Fox vice chair Chase Cary argued the media companies need a scale to compete. However, the Financial Times’s contributing editor, Anne-Marie Slaughter, makes a compelling argument against vertical mergers, which “seem very last century.” Much of what she says also applies to horizontal mergers — deals between companies operating in the same media sector.
News companies increasingly use Artificial Intelligence to tailor services, personalise content, and target advertising. Because of new technologies available, media companies will become smaller. Slaughter points out “the future is more likely to belong to companies that have a smaller number of managers overseeing machines and freelancers, the gig economy writ large.”
So, in this scenario, why does a massive merger make sense?
In his piece for the Forbes magazine, CEO of Linius Technologies Chris Richardson wrote that, in the future, news will be “hyper-personalised content, curated by a trained algorithm that learns your preferences over time.” More importantly, he points out AI and automation are already used in multiple newsrooms (such as Bloomberg and Associated Press) and this delivers news content “faster, at scale, with less cost.”
So, following from this, it is hard to understand why — in this world defined by the gig economy, automation, and AI — massive media mergers and economics of scale make any sense.