Report: Window for U.S. Firms to Enter Global Pay-TV Biz Now Closed

NEW YORK: The window for U.S. media and entertainment companies to enter the global subscription-television market is now shut, after having spent $5 billion on acquisitions of international pay-TV assets over the last two years, according to analysts Sterne Agee.

Analysts Vasily Karasyov and Kutgun Maral indicate that the focus for American media companies involved in the global pay-TV business will now shift from M&A to execution. "We think that only the players with meaningful scale will benefit from overseas growth; those that don’t have material exposure at this point are unlikely to gain it." FOX International Channels and DIscovery Communications are seen by Sterne Agee as the "the best ways to invest in international pay TV."

For American media companies, 2014 EBITDA coming from overseas channels will increase to $3.8 billion from $2.5 billion in 2011, out of total revenues of $13.5 billion. The gains are being led by Discovery and FIC. "We think it’s the footprint that enables the two companies to grow, both organically and through acquisitions. Discovery owes its scale to being one of the earliest players in international pay TV. FIC has benefited from an accelerated pace of channel launches over several years which was possible because of the company’s affiliation with many pay-TV distributors in the world."

Scale is essential for benefiting from pay-TV growth internationally. "A player with multiple channels in a territory can fund new channel launches and lock in desirable programming (sports and fiction) thus expanding its share of the dial. Presence on the ground creates room for synergies with newly acquired assets on the cost side and advertising sales on the revenue side."