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Media Megadeals Chilled by Rising Rates
5 Oct
Summary
- High interest rates are hindering merger and acquisition activity in media.
- Companies should adopt AI and new tech to attract younger viewers.
- Paramount's significant debt for WBD acquisition is seen as risky.
High interest rates are significantly impacting merger and acquisition activity within the media and entertainment sectors, according to veteran money manager Ross Gerber. He suggests that a substantial increase in interest rates makes large-scale deals, such as Paramount's acquisition of Warner Bros. Discovery, financially challenging and potentially unwise due to the immense debt involved.
Gerber advocates for entertainment companies to adapt to evolving consumer behaviors and technological advancements, particularly artificial intelligence. He believes AI can revolutionize content creation by lowering production costs. Companies are urged to invest in growing areas like creator content and video gaming to capture the attention of younger demographics, rather than clinging to outdated business models.
Despite current market conditions, Gerber identifies opportunities in undervalued companies like Netflix and Take Two Interactive, especially with the upcoming release of 'Grand Theft Auto VI.' He also views Alphabet (Google's parent company) favorably due to its dominance in video and search, highlighting its consistent revenue generation. Companies like Disney and Comcast (specifically NBCUniversal post-split) are also mentioned as having strong assets, though they face challenges adapting to market shifts.
