What you’re missing: The Reset is a newsletter we send out every Sunday to the corporate enterprise subscribers to WrapPRO. If you think your company or organization would be interested in signing up for an enterprise plan, please reach out to our head of enterprise sales, Kimberly Donnan, at kimberly.donnan@thewrap.com.
UPDATE: Since this newsletter was first sent out, a new round of bids for Warner Bros. Discovery landed. Here’s our coverage of those new bids: “WBD’s Bidding War Escalates: Here Are the Challenges Facing Comcast, Netflix and Paramount | Analysis.”
Greetings enterprise subscribers,
Tomorrow marks the deadline for the second round of bids for Warner Bros. Discovery, underscoring what has become an exciting year for M&A in media and entertainment and quite a turnaround from the year’s sleepy start.
It’s also just a reminder of how the nature of mergers & acquisitions has changed, rooted more in survival than a rationale for growth. That some of the mightiest names in Hollywood (in this case, Warner Bros. Discovery) are not the hunters but the acquisition targets foisted up for sale in an auction, like estate jewelry, reflects this shift.
We’ve seen the contraction of media and entertainment properties for years but the number of possible gatekeepers sliding into the low, single digits carries lots of consequences — for creatives, investors and consumers.
But the reality check is this: Shrinking cash flow, subscriber stagnation, deteriorating economics of business units and rising debt burdens are fueling the wave of deals.
Legacy cable assets have been bleeding subscribers for 10-plus years; the disruptors — the streamers — are finally seeing profitability but not enough that they know could come with more scale.
In media, publishers and digital firms are bending under “ad revenue compression,” a fancy term for a Madison Avenue retreat.
M&A is a non-virtuous cycle in which few combinations work. Big deals are great for headlines and great for the fee-hungry merger-industrial complex that has been built up around them: lawyers, investment bankers, communications spin doctors and even career-retraining outfits that grab onto the wave of layoffs that inevitably follow mergers.
This year will be no exception as the so-called Trump pause for dealmaking faded quickly heading into the summer. Defense is the new offense in Hollywood, not just against the forces in the White House but against the capital markets, where higher-interest rates, risk-averse investors and PE pushing even harder to extract value from distressed properties is forcing companies into M&A as the only way forward to liquidity.
The final month of any year is always a tell so let’s watch as the business auctions off its future.
See you here next Sunday.
Tom Lowry
Senior Vice President/Editorial Strategy
tom.lowry@thewrap.com
1. Cord-Cutting’s Inflection Point We will be posting a story tomorrow from our TV business reporter Lucas Manfredi about how linear TV, particularly cable, is managing its rapid decline.
We offer you this chart as an early look that in many ways says it all. The term “cord-cutting” first began to be used by analysts and consumers online around 2008 to describe the phenomenon of viewers dropping their cable TV packages and discovering shows and movies elsewhere. This all coincided with the emergence of Netflix at the time.
But for awhile the industry stayed ahead of the churn. It would be another two years, in 2010, before cable TV hit its peak for penetration of U.S. households, at 88%, or 105 million homes.
As you can see by this chart based on data from the firm Madison & Wall, the penetration is expected to go below half of all U.S. households by the end of this year, following another slide to 50.2% in the third quarter.
2. The Cat’s Cradle of Sports Streaming Remember the game of overlaying string across your fingers? This chart from eMarketer reminds us of that as it shows the streaming relationships between sports and streamers.
Sports is the last bastion of truly engaging live entertainment and everybody wants a piece of that. Expect the cat’s cradle to be even more complex in the years ahead.
Max Reisinger’s path to a CEO role began from a place of loneliness. When he was 15, Reisinger’s family moved to France and he did not know the language. To combat that early isolation, Reisinger created a YouTube channel that eventually had 750,000 subscribers and more than 30 million long-form page views. He likes to say he was lonely no more.
Within that online community, Reisinger has said that “after a few Discord calls, we decided to live in the backwoods on Montana for a month together. We spent many late nights talking about how the next wave of film was going to be born on the internet; we called The YouTube New Wave.
“These were the early days of ‘internet cinema’ for us. That month in Montana led us to hosting more events, bringing out more creators, and eventually became ‘Creator Camp.’” The Austin-based creator collective, established in 2021, was set up as a way to disrupt Hollywood by giving creators the funding, tools and distribution they need to expand beyond social media.
Our creator economy reporter Kayla Cobb recently posted about Creator Camp.
“What is the internet’s Sundance? If we want to prove that creators can also be on the big screen and build the future of entertainment, where’s that place we can come together to celebrate the work?,” Reisinger told Cobb.
The latest offshoot of Creator Camp is “Two Sleepy People,” made for $100,000 over the course of 100 days from script to final product. With no marketing budget, the founders of Creator Camp and team behind the movie bought an RV and drove it from theater to theater.
Reisinger has no MBA and, in fact, no college degree. This YouTube video explains why he dropped out of Santa Clara University in 2023. And he’s never looked back.
It’s easy to be cynical about someone so young talking about disrupting the Hollywood model, but we’ve seen this before in industry after industry. He’s getting plenty of pitches now from filmmakers who couldn’t find any traction in Hollywood. “We want to keep proving that creators can make stuff with a big screen and that audiences will show up,” Reisinger told Cobb.
At a time when independent film is struggling, Reisinger’s leadership may just be one seed of hope for so many aspiring auteurs of internet cinema. And as M&A inevitably contracts options for filmmakers, opportunities like Creator Camp can only stand to become more viable.
Hollywood Is Reeling—and PG Movies Have Never Been So Popular, Wall Street Journal
Eight ways leaders can show gratitude at work, Charter
Kevin Reilly got to the top of the TV heap. Now he’s in AI, Channels With Peter Kafka podcast