In December 2017, The Walt Disney Co. announced a blockbuster deal to acquire the entertainment assets of 21st Century Fox for $52.4 billion. And then, a few months later, Comcast came along.
What followed was a public battle for Fox’s assets, with Comcast bidding up the cost to an eye-watering $71 billion, even though Disney ultimately prevailed.
“In that deal, as people will probably recall, we had a signed definitive agreement with Fox at $35 per share,” recalled Kevin Mayer, the CEO of Candle Media. “That didn’t stop things.”
Kevin Mayer was Disney’s chief strategy officer at the time, and he was involved in every step of the Fox deal. Now, he sees that battle playing out again, as Netflix and Paramount prepare to battle for Warner Bros.
“That was a difficult process. It added $19 billion to the price tag, still a good deal, but not the exceptional deal that it was before we had to pay more. And it was a good example, I think, of the board of Fox doing its job and hearing out other offers that came in,” Mayer said. “It also, I think points to where we might see this going. I think the the initial foray of Paramount going and taking the existing offer directly to shareholders, I think, is just the first step of what we’re going to see here.
I would be very surprised if we don’t see a sweetened and perhaps meaningfully sweetened offer during this process,” he continued. “I think David Ellison has already hinted at that, that he hasn’t done his best and final yet, and I suspect he hasn’t. So I think we’re in for more fireworks here.”
Mayer made the comments at a conference hosted by UBS Tuesday, where he was interviewed by analyst John Hodulik.
Mayer said that the big winner will be Warner Bros. Discovery shareholders.
“From the Warner Bros. Discovery perspective, this is nothing but good news, the price is going to go higher,” Mayer said. “The team at Paramount is aggressive. David and Larry Ellison have got a huge amount of money for sure, and I don’t think there in a huge amount of hesitancy to spend it. I think they see a nice outcome at the end if they are able to prevail.
“I think the industrial logic is there for both deals,” he continued.
Mayer suggested that Netflix’s interest is primarily in the Warnrs film and TV studios, rather than HBO Max, though of course they would leverage it were they to buy it.
“If you want to really nail down these franchises and have them at your disposal for the long-term, and Warner Bros. aside from Disney is the second best studio I think, with those franchises in place, it just makes a lot of sense,” Mayer said. “It gives you access on a permanent basis on an advantaged basis to content that would otherwise be more competitive and more difficult and uncertain to have access to.”
But Mayer, whose Candle Media is a seller in the current market with companies like Hello Sunshine and Moonbug, says that he sees a future where the entertainment business gets smaller and more consolidated, whichever party ultimately prevails.
“There will be fewer competitors, a smaller industry with probably reduced output of creative content,” Mayer lamented. “To the extent that we have fewer opportunities for revenue, operating costs and programming costs have to decline.”