The mountains are as beautiful as ever, the climate of the deal is not as good as the boutique investment bank Allen & Co., which is preparing for its annual trip to Sun Valley. After the guests arrive on Tuesday, the official activities begin on Wednesday.
The annual ritual of media moguls rafting and shop talk is a 40-year tradition after July 4th. It was put on hold in 2020 during the worst of Covid but returned last year in a stripped down, masked and masked version shortly after two big deals were announced – the Warner Media and Discovery merger and the planned Amazon MGM takeover. Then-Discovery CEO David Zaslav’s first comment to Sun Valley reporters a year ago: “We’re not done yet.”
He is now the chief executive of the new Warner Bros. Discovery and will likely be more prudent as the heavily indebted company struggles to deliver on promised $3 billion in cost savings and, along with its peers, weather the brutal stock market, Wall Street. a dramatic change in streaming, skyrocketing inflation, rising interest rates, and possibly a looming recession. We have heard that Zaslav’s presence has been confirmed, as has WBD’s director of revenue and strategy, Bruce Campbell.
These two deals stirred up the media in a fight over who lost and what could happen next. Paramount (known a year ago as ViacomCBS) wanted a big deal, as did NBC Universal, Comcast’s parent company. Both were looking at Warner Media. Paramount non-executive chairman and majority owner Shari Redstone will return. CEO Bob Bakish was invited but couldn’t.
Fox CEO Lachlan Murdoch and COO John Nallen confirmed. Like the CEO of Sony Group Corp. Ken Yoshida and Jim Ryan, Head of PlayStation. Casey Wasserman and Mike Fries too.
Not all invitees are required to attend. But Rupert Murdoch is a regular and Bob Chapek – a new three-year contract in hand – was there last year. Among the invitees are also tech executives, including Elon Musk, Apple’s Tim Cook, Meta’s Mark Zuckerberg, Amazon’s Andy Jassi, and Alphabet’s Sundar Pichai. The list features a number of top media chiefs – companies that could or do banks with Allen & Co. — and executives of companies that are clients.
By placing executives in close proximity and clad in khakis, the Sun Valley conference sowed the seeds of mergers, from Disney’s 1995 purchase of CapitalCities/ABC to Amazon founder Jeff Bezos’s 2013 acquisition of The Washington Post.
For guests Reed Hastings and Ted Sarandos, co-CEOs of Netflix, the year since Allen & Co. 2021 was of the utmost importance. The company’s shares are down 70% year-to-date after the company lost subscribers for the first time last quarter, announcing it would lose even more in the just ended June quarter and unexpectedly unveiling plans to launch an ad-supported service despite she fires the staff. . As a result, Netflix is increasingly seen as a takeover target — an unusual shift.
Independent Netflix is ”gone,” one financier predicted. It is a very valuable platform, but “no longer a growth story.” Hastings and Sarandos “failed to live up to the Street’s expectations” and lost a couple of hundred million dollars in market capitalization in one fell swoop, he said, referring to the last post-earnings video call when the co-executives discussed the lack of subscribers.
According to him, over the next 18 months, “the environment will become cleaner.”
This is also around the time that buyers might consider acquiring WBD. The structure of this deal will incur huge tax penalties for any buyer within two years of closing.
What happens between now and then, one can only guess. Netflix’s effect has spilled over to other streamers as investors question the economic viability of the high-cost but still marginal business. Meanwhile, pent-up demand, the Russo-Ukrainian war and ongoing Covid-related supply chain problems have fueled sky-high inflation. A corresponding increase in interest rates by the Federal Reserve could lead to a recession, a fear that has hit advertising and could seep into other areas of entertainment.
As a result, the Allen & Co. comes just after the S&P 500 ended its worst first half since 1970, down more than 20%. The Nasdaq was worse, dropping nearly 30% and the Dow down 15%. Technology stocks have been hit the hardest, but media has lagged behind broader markets as the second quarter ended yesterday.
Deals are still in the news. The long-awaited merger of CAA-ICM has just been completed (Allen & Co. acted as a consultant to CAA). An Elon Musk deal with Twitter (Allen is an advisor to Twitter) and the purchase of Microsoft Activison Blizzard (with Allen an advisor to Activision) are under consideration.
But PwC’s M&A outlook recently predicted a slowdown in major media mergers and acquisitions, which seemed to be gaining momentum last year amid low stock prices and high interest rates. Equity payments are now limited, and access to the debt market is more expensive. Companies don’t like to sell low.
Endeavor just yesterday cut a planned $1.2 billion cash and stock purchase for $400 million sports betting platform OpenBet to $800 million.
And he’s not always right, but he’s not alone: Zuckerberg reportedly told Meta employees today, “If I had to bet, I’d say this could be one of the worst recessions we’ve seen in recent history.”
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