There’s a strong expectation that 2025 will be a year of consolidation in media and entertainment, and there’s good reason to believe those forecasts will turn out to be true.
But here’s the thing: buying, selling, spinning off and merging media properties won’t necessarily solve the long-term challenges faced by many media companies as they move to adapt to a world transformed by changing consumer behaviors, the rise of AI and the decay of legacy business models.
It’s easy to see why media pundits, analysts and investors expect to see a lot of dealmaking in the year ahead, especially compared to the relative quiet of the last two years. Among the factors that could drive consolidation:
- A more business-friendly regulatory environment under the incoming administration
- A stronger economy
- Lower interest rates
- Over-crowding in certain segments, particularly streaming
- Continued declines in legacy media, particularly cable TV
There were already a few table-setting moves announced last year that will take effect this year and could lead to more activity. These include Paramount’s $8.4 billion merger with Skydance, Comcast’s spinoff of most of its cable networks into a separate company and a Warner Bros. Discovery restructuring that could set the stage for a separation of its legacy cable assets.
But those moves may only mark the beginning of an M&A frenzy that could see further consolidation in streaming, the acquisition of stand-alone businesses and strategic partnerships. Warner Bros. Discovery and Comcast are seen as the most likely to pull off bigger moves. Roku has also been mentioned as an acquisition candidate.
Writing in Forbes, David Bloom noted that “with more than 80 million households and a thriving ad supported Roku Channel throwing off cash, Roku should be a giant M&A target.”
There could also be a spate of smaller deals as stand-alone digital publishers merge or are absorbed into more scaled operations better able to withstand traffic pressures and advertising declines.
“After two years of stagnation, merger and acquisition activity should return with a vengeance in 2025, driven by an improving economic outlook and a friendlier regulatory environment,” Adweek wrote in a recent round-up of media executive predictions.
But here’s the thing: bigger does not necessarily mean better, or even better able to withstand the coming storms. The recently announced acquisition of ad-agency holding company Interpublic by rival Omnicom Group was seen less as an innovative move than an attempt to remain competitive as AI threatens agency jobs and tasks and media spending concentrates with tech giants such as Google and Facebook.
“By combining, Omnicom and IPG are looking to ensure their survival,” according to Business Insider’s analysis of that deal.
Media and entertainment companies are also facing multiple existential challenges that won’t be solved by size alone: the impact of AI; changing audience behaviors that have seen young people favor mobile consumption over TV and movie screens, and; the continued decline of legacy media such as broadcast, cable, print and terrestrial radio.
A robust market for M&A will address some weaknesses and could be seen as a sign of optimism for media and entertainment. But even the most scaled players will still need to innovate to solve for the challenges outlined above, by exploring new consumer offerings, turning technology to their advantage and transforming their business models to reflect new realities.