A major trend is almost becoming a key characteristic of the media industry: the tendency to create bigger entities by mega mergers. The goal of most large media companies seems to grow even bigger by merging with another big company or by swallowing a lot of other companies. The idea is that only large companies will survive in the future TV world and smaller companies will be set to loose not only marketshare but their very reason for existence.
While I do believe also that with certain business models you are bound to grow by merging not matter what, I do disagree though that this will kill smaller networks.
Telcos feed on growth
Firstly, certain business models will need growth as its intrinsic driver. This is especially true for telecommunication companies – and a cable operator or DTH platform is nothing else than a telecommunication company in its essence. They need the growth so that they can exploit the economies of scale. The larger their subscriber base the more cost effective and efficient they can work – and the bigger their margin. Of course, they will exploit the dominant market position in negotiation attractive deals with the content suppliers. But at the same time they also know that they have to offer attractive content for their subscribers. There is a fierce battle out there amongst the various distribution infrastructures and whoever offers the best content and services to the subscribers will win them over. This is actually a chance for small niche and thematic content suppliers and producers. These big companies will need them to complement their offers to the subscribers and they will make sure that they are paid enough to make their living and stay there in the long-run. It is an ecosystem not of hunting and killing but of symbiotic co-existence.
Channel Networks feed on bulk
Secondly, the larger networks will also need to grow by acquisitions and mergers because they drive on selling bulk. Such networks like AMC will need a large sum of TV channels in their portfolio so that they have the muscle to negotiate good terms with the distribution platforms. In addition, many channels allow for content exploitation across many outlets. You can repackage and rerun the same content many more times if you own the outlets. Especially, if your own production source is limited, it is of ultimate importance to monetize the existing content to its extreme. That is why large networks will grow larger and will keep adding channels. They will focus on mainstream and on some niche segments – as long as these are large enough. They will probably not dabble into smaller niche or thematic areas because they will not invest in the expertise, man-power and heart that is often required to focus on a certain niche. Hence, they will not be a threat to smaller players that are serving a certain market segment.
Smaller players need to invest into their “fitness”
Finally, the focus for small players must not be on growing into a large empire but to be the fittest in its segment. As long as you are the market leader in your niche and offer the best possible content to your particular “digital tribe”, you will survive and have an economic model that is sustainable. The proliferation of distribution network will more and more make it affordable and feasible to reach your audience directly and hence allowing for building your own loyal following. This is then making you independent of any larger telco or network.
So, in summary: survival for the biggest only if being big is in your genes and for the fittest if you are fit in your segment. And if that doesn’t work, then merge.
How can you get your business fit and fitting in?