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Time Warner bid talk is all OTT

January 15, 2016

Love him or hate him – and, like most, I have a chronically schizophrenic attitude – you have to hand it to Keith Rupert Murdoch. If at first you don’t succeed, try, try again: 84 years-old, three marriages down, let’s just give it one more (bets anyone?) go. Ripper.

I for one don’t want to dwell any further on KRM’s personal life. But could it be he will try, try again in business too? Since New Year the American papers have more than once speculated on another 21st Century Fox tilt at Time Warner following the abandonment of the last bid in late 2014.

Last time Jeff Bewkes, Time Warner chief, beat off the takeover by making Wall St believe he could deliver a share price above the bid level. He did, buoyed in part by HBO Go borrowing some of the fairy dust dowsing OTT players like Netflix. However, this became just dust when most ‘traditional’ media stocks took a soaking when tiny declines in paid subs were over-interpreted as end-of days cord cutting in the second half of 2015.

So, Time Warner’s share price has returned to below 21C Fox bid levels. Trouble is Fox – another ‘traditional’ stock has been equally hit and its stock is also some way below the bid level, so a similar offer to before would make the whole deal worth considerably less.

Time Warner insists it isn’t for sale and it does seem unlikely 21C Fox could raise a price that works for itself and Time Warner stockholders. The trouble is they are similar companies; following their respective splits and spin-offs both are seasoned high-quality content creators who have parlayed that ability to wield great power in distribution from theatres to networks, to cable and DTH. But doubling that creativity and power (even if that worked) just doubles the bet on making the ‘old world’ work.

More likely is a bid for Time Warner from a game changer business – who also happen to have tons of money; Apple, Amazon, Google, take your pick. And it is likely Time Warner will be the target; it is making excellent product just now (unlike, say, Viacom), but unlike Viacom and 21C Fox itself, it has no sheltered special family stock and is, therefore, more likely to fall to straightforward financial firepower.

Of course, should Time Warner go to one of the game changers, the others will need to react. Disney shares anyone?



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