So, Where's the Opportunity?
For an investor, all this disruption can be rather compelling. The key, I think, is to look for those companies that possess valuable assets, perhaps a decent content library or a loyal audience, but simply lack the scale to go it alone. These are the firms that often become attractive takeover targets for the bigger fish looking to expand their empires. When that happens, the anticipation of a takeover premium can drive share prices up quite nicely.
It’s not just about getting bigger, it’s about getting smarter. The most successful mergers will be those that combine complementary strengths. A company brilliant at making content might pair up with one that has superior global distribution. When these synergies work, they can lead to better financial performance, which is typically good news for shareholders. However, and this is a rather large however, it’s never a one-way bet. The entertainment world is littered with risks, and it pays to be aware of them. Consumer tastes are notoriously fickle, and yesterday’s smash hit can become tomorrow’s forgotten relic in a heartbeat. Content is also ruinously expensive to produce, and even the deepest pockets can’t guarantee a blockbuster. This is, and always will be, a business of creative risks.
