Sam Powers of UBS recently spoke to Dave Faber on CNBC. The conversation was about the forecast for M&A activity and where it might lead this year. Here are some excerpts that are worth noting.
CEOs are more comfortable with the structural changes they’ve seen in the industry and there are a few things coming out of these key themes. They also need more premium content that consumers want to engage with. Something Faber didn’t touch on is that there’s a lot of push toward international expansion with 20 percent to 30 percent of revenue coming from international. When you talk about capital allocation, the companies have extraordinary healthy balance sheets
When you look at annual buybacks of 10 percent, most of the large cap media companies have authorizations close to nine percent of their shares outstanding that get refreshed every year. There’s only so much capital you can return to shareholders before shareholders ask the question, do you know what are you doing with this capital? Are there places to invest or are you a balance sheet story?
Over the top scared everybody for a long time. Now they are not only comfortable with over the top, but they have learned how to monetize it.
The result is that many over the top solutions may become partners of the future. If you think about it, this lends itself to more opportunities and one place where we may see companies focus is what’s working on YouTube.
Based on Craig Moffett’s analysis, it’s unlikely we are talking about M&A coming from AT&T or Verizon, but the content kings are on the prowl.
While I am personally attracted to comedy channels, in my honest opinion, we should see a new generation of game shows. It’s possible that Zynga’s fall will come back by adapting to having customers be more integrated.
Don’t consider this a CityVille or Farmville, but a game show format with real dollars better associated with virtual dollars. Perhaps adding something like Crowdmob will make it so there is a mobile social component.
Since Cable is the likely recipient it may be that we see this strategy implemented around something very local. Perhaps integrating a YELP foodie program or an Angie’s list makeover show.
A side note is that WebRTC might be a great platform for supporting the social mix. Integrating the video streams with a social component adds a dimension that will work as more and more smartTVs gain traction.
Bottom line: Expect to hear about a new breed of solutions in the market soon.
Edited by Stefanie Mosca