A Federal Judge yesterday ruled that AT&T could complete its $85 billion takeover of Time Warner, including HBO, CNN, DC Entertainment and all of its popular media properties. With no major music companies in either company's portfolio, the impact of the mega-deal on the music industry would seem to be minimal. Think again.
According to a chorus of Wall Street analysts, the takeover of Time Warner by AT&T will lead to higher values for all content companies, as well as many more mergers and acquisitions. "M&A activity across the media and telecommunications landscape has largely been in a holding pattern awaiting the outcome of the T/TWX deal," Jefferies analyst John Janedis told CNBC. "With the deal approved we think it could spur other M&A activity for the group."
With Sony, UMG,and Spotify owned by publicly traded companies and WMG, Pandora, many major publishing catalogs and other music companies controlled by investment groups, the temptation to sell at a price inflated by optimism over streaming and an M&A feeding frenzy may be too great to resist.
For content, media and telecom companies looking to quickly grow their business, music companies have often been a sexy, if not always profitable, choice.
We've seen similar scenarios play out in music before. While eventually a few powerful players emerged, along the way many industry and artist careers were cut short by layoffs, roster reductions and other cost cutting, as new corporate owners sought return on their over priced investment. If you still need convincing, remember how investors Terra Firma gutted EMI.
Today, the takeover of music by technology companies is starting to look pretty good by comparison.
- Bruce Houghton