Ben Tolley, a partner at the media and technology corporate finance adviser Clarity, looks at what Liberty Global's purchase of BSkyB's stake in ITV says about the UK TV industry.
What does cable mogul John Malone’s (Liberty Global's chairman) raid on the Rovers Return ([ITV) yesterday tell us about where the UK media industry is today and where it is headed?
The last 18 months have witnessed an inflection point in the UK economy and – in spades – its advertising markets. Let’s not forget: we entered 2013 still in the doldrums; the ad market was expected to be stagnant; and the forecast said heavy weather for TV. But ever since broadcasters have been showered with pennies from heaven.
The verdict from US-based media mammoths has been unequivocal – confidence in the UK is back, and it is back big. After several lean years for the large investment banks (our hearts bleed), it has been a bonanza, as deal after deal has swept over the UK broadcast sector.
First Liberty pounced on Virgin Media for $24 billion (£14 billion), then Viacom stumped up £450 million for Channel 5 in May, closely followed by Liberty and Discovery’s £550 million foray for the TV producer All3Media.
On one level, the six per cent stake in ITV, valued at £481 million, is a tactical play. Sky needs cash to consolidate its European interests. It had been looking to place the stake with financial institutions, but Liberty made a move. Whether this is a prelude to a full bid by Liberty – which they have ruled out for the time being – or just a clever trade, time will tell.
Either way, ITV is now firmly in play and it will probably only be so long before a US-based global player finally snaps it up. The share price says the market agrees.
At the heart of these moves – and to some extent the rebuffed Fox/Time Warner offer – is a recognition of the value of content production and ownership by those in the cable and channel distribution game.
Mobile devices and Netflix-style over-the-top delivery pose a threat to old distribution models. Content is the defence. So, all this activity is very instructive while the advertising and media agency world adjusts to the long-term breakdown of traditional advertising. We all need to be in the content business now.
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