The essence of mergers and acquisitions in the media and entertainment industry – interaction and transcendence
The essence of media and entertainment mergers and acquisitions interaction and transcendence
At first glance, with the advancement of technology, interactive media will only become more complex and widespread. In fact, there are currently two types of acquisition strategies that can help enhance capabilities to achieve a more interactive future – transactions to expand capabilities and transactions to establish the next generation of large platforms.
Therefore, brands need to consider where their consumers will be in the future and ensure they can maximize merger or partnership options to attract them.
By Jing Wen
At the beginning of last year, we saw more and more media companies turning to acquisitions to expand their scale and become a destination for cross-consumer touchpoints, and this trend continued strongly throughout the year.
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Amazon aimed to strengthen its entertainment capabilities on its large platform and completed the acquisition of MGM, which provided Amazon with a larger intellectual property (IP) library and increased its talent base in content production. To expand its content scope, WarnerMedia merged with Discovery to expand its direct-to-consumer (D2C) base.
These “games” reflect the trend we have seen in recent years – the more brands can provide consumers with a one-stop entertainment store, the more competitive advantage they can gain.
So, what will be the most exciting growth in 2023? The answer is transactions that allow companies to expand interactivity more deeply.
It is no secret that interactivity is redefining media and entertainment. With the increasing popularity of video games and the emergence of social media, consumers have become accustomed to being a part of the content. Consumers shape content as amateur creators, paving their own paths in the virtual world, and increasingly see the online world as a key point of contact in their lives. In fact, data shows that nearly half of those aged 13 to 34 today are more willing to socialize with peers in video game environments than in the real world.
As technology advances, interactive media will only become more complex and widespread. Megaplatforms and others in the media and entertainment ecosystem realize they need to play a role here to win consumers over the long term.
As companies invest in gaming, two main strategies for building future capabilities in a more interactive world are emerging:
1. Acquiring to expand gaming capabilities;
2. Acquiring to build the next generation of megaplatforms;
0 1 Acquiring to expand gaming capabilities
Microsoft announced its biggest deal of the year, a plan to acquire Activision Blizzard for $69 billion. Although this is built on the basis of past acquisitions of small gaming companies and Microsoft’s hardware capabilities, it represents a clear interest in the game publishing part of the value chain and the vast D2C range supported by Activision games.
The biggest deal of the year so far is Take-Two’s acquisition of mobile-focused Zynga. With the strong growth of mobile casual gaming, it makes sense for publishers to expand their influence. Although this looks like a scale acquisition, the deal also has scope dimensions. Mobile game development is vastly different from the strength Take-Two has built up over the years, and expanding its capabilities through Zynga gives it the right to cross more consumer touchpoints in the growing gaming market.
The New York Times has acquired the simple word game Wordle for a low seven-figure sum, a move that may not be flashy, but is indicative of the game’s importance for the future. While small by global acquisition standards, it’s a major investment for The New York Times, which hopes to build a more interactive future. Wordle’s fan base and interactive format will help solidify The New York Times’ prospects as a future major consumer platform.
Image source: Google
02. Acquisition to build the next generation of giant platforms
Expanding the influence of games is one angle, but many companies see games as a tool for broader entertainment spaces, and thus the foundation of their large platforms.
Meta has made the loudest noise in expanding its activities into new interactive spaces, with the vision of owning a virtual universe and acquiring targets that play games in virtual reality (VR) space (Armature Studio, Camouflaj). Meta was forced to admit the decline of its traditional business, so it relies on investment in new modes of interaction – namely, the metaverse and VR-enabled games – to pull it out from the other end. Companies like Meta are why people think these trends are not just about games as we know them today, but the entire interactive world.
Image source: Google
In fact, everyone sees a lot of investment in the virtual future of cross-social network, gaming, and other media fields.
Equally broad in scope, Epic Games has consistently stated its intention to invest in its metaverse through organic development and acquisitions. In true big-platform style, it’s working to bring other media divisions into the metaverse, as demonstrated by its acquisition of Bandcamp in March. Given Epic’s early attempts to bring music into the gaming world in innovative ways, such as holding concerts within Fortnite.
Not everyone can become a super platform, and likewise, the “wind” of interactive investment has different effects on different media and entertainment companies. Those who are already in the game may want to consider their integration capabilities to compete with larger players, especially by combining high-quality IP development capabilities with advanced technological capabilities, thus achieving new consumer interaction models. They need to consider whether there are ways to expand the platform through mergers or partnerships.
For those who are not currently in the more interactive fields, they need to consider how their industry can benefit from mergers or collaborations in this field. For IP-centered companies, transforming content into games in some form should be a key part of any licensing strategy, but if an acquisition is not within the company’s capabilities or budget, licensing and partnership arrangements may be the right model. For other distribution platforms, considering which technologies can allow the brand to grow into a more interactive space, such as hosting traditional media events in the gaming world, may trigger discussions about acquisitions or collaborations that may be more feasible in different aspects.
One particularly important thing not to overlook is that interactivity is on the rise, whether in the social and gaming world we know today or in the future virtual world. Thoughtful consideration can enhance the correct way to play to strengthen core strengths, such as through specific types of content or brand partnerships that leverage technology capabilities they do not possess.
As usual, companies need to strategically consider their business locations and selected partners based on basic considerations such as appetite, risk, and return on investment.
Brands don’t need to be technological innovators to take advantage of the future. But they do need to consider where their own consumers will be and ensure that their choices in mergers or partnerships maximize their interests.
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