As the streaming wars heat up, many contenders are pursuing M&A to add scale and differentiate themselves with content, talent, and technology—but success will likely depend on fast, seamless, and thoughtful integration.
US consumers now have almost 400 streaming video services to choose from,1 driving intense competition for audiences that are carrying more subscriptions—and more overhead—to chase the content they want. The shift to streaming platforms and direct-to-customer (DTC) business models is creating a “Gold Rush” for players looking to acquire creative talent, technologies, and the content needed to attract and retain subscribers.2 This is a once-in-a-generation opportunity for players to amass scale quickly and potentially differentiate in an increasingly crowded marketplace.3
To remain in the game, media companies should rapidly integrate acquisitions, while delivering compelling new content and services. They cannot risk losing the attention of their customers in an environment where 53% of US consumers are frustrated by the need to manage multiple subscriptions, fueling high churn rates for video streaming services.4 But executing on M&A deals effectively in this dynamic environment is not easy, and doing so with an eye toward delivering enduring value to customers will likely be key to success.
Media companies should move quickly and decisively to combine newly acquired assets. Having a clear end-state vision for the combined organization and a plan to get there can be critical to achieving these goals.5
Develop a clear strategy for integrating acquired brands and content. Amassing content is critical to drawing more subscribers, but acquirers should first consider how and where that content will live in their portfolio. Some acquired content can reinforce the existing brand, while other content belongs in the acquired brand or, potentially, a newly created joint brand. This can be the foundation for maximizing brand value and monetization.
Align pricing and monetization with brands and content portfolios. How acquired content is priced depends on the goals of the acquisition. A premium paid service may buy content that reinforces its ability to retain premium subscribers. Or it may wish to expand an ad-supported offering under a different brand to reach a broader audience. Such choices can shape how acquired content is bundled and priced, and how the investment is returned over time. With the market increasingly moving to more pricing tiers, acquirers should define a strategy to reduce customer confusion and maximize value and customer loyalty.
Seek a holistic view of the combined customer base. Subscriber growth is necessary, but it doesn’t track profitability nor is it an indicator of customer loyalty or “stickiness.” Instead, acquirers should seek to understand and increase a customer’s lifetime value (CLTV), from acquisition, conversion from free to paid, and to lasting retention. This view can inform and reinforce monetization strategy. Accordingly, acquisitions should consider the value of an acquisition target’s customer data, develop a holistic approach to customer data and viewership behaviors across segments, and plan the back-end integration necessary to operationalize it across the new organization. Ultimately, the converged data set should support the customer experience, for example, by generating more relevant content recommendations.
Clearly plan the integration of technology and data platforms. Deciding what to keep, merge, or get rid of involves a clear understanding of delivery, quality of service, user experience, and data strategy. During the integration phase, it is often important to ensure content delivery, recommendation engines, advertising, subscription management, and payment processing systems continue to work flawlessly. Maintaining separate brands can further complicate integration decisions.
Plan how to leverage acquired talent and establish the culture of the combined organization. There is tremendous competition for creative talent in the media & entertainment industry.6 Acquirers should have a plan for which roles and skills they need most and how they can identify and leverage the best talent. This will likely require merging cultures and ensuring an aligned content strategy. Additionally, the uncertainty caused by an extended integration process can paralyze the creativity needed for long-term success. Acquirers can minimize attrition by exploring ways to build positive momentum in the combined busines, and actively encouraging collaboration across legacy business lines.
All this should be done in an aggressive timeframe to minimize distractions to both employees and consumers, and to quickly realize the cost and revenue synergies that can be critical to making the deal accretive. Assuming acquired companies can be integrated over time is a luxury that media acquirers can no longer afford. Value ultimately comes from aligned content and pricing, with a rich and seamless user experience delivered by optimized technology. This requires careful planning, in a competitive business environment that demands quick and seamless integration. As the historic shift to streaming video matures, successful mergers and acquisitions will likely have played a key role in determining who is still in the game.
Technology, Media & Telecommunications
Deloitte’s Technology, Media & Telecommunications (TMT) industry practice brings together one of the world’s largest group of specialists respected for helping shape many of the world’s most recognized TMT brands—and helping those brands thrive in a digital world.
The authors would like to acknowledge the content contributions of Daniel Ledger, Kevin Westcott, Jana Arbanas, and Jeff Loucks. They would also like to thank Brooke Auxier, Rithu Mariam Thomas, Kimmerly Cordes, Shubham Oza, Sayanika Bordoloi, Gautham Dutt, and Jaime Austin for production assistance.