Media musical chairs

US media players are increasingly developing a taste for the flesh of British TV companies in what is turning into a very expensive game of musical chairs. What is going on and where will it all end? Raymond Snoddy investigates.

A frenetic, multi-billion game of musical chairs is under way in the media and all the signs are that the music is going to get faster and faster. The mood could get increasingly desperate by the autumn because no-one will want to be left clutching thin air when the music stops.

Even a preliminary, incomplete list is deeply impressive with Rupert Murdoch leading the way at the age of 83 with a first, rejected, $80 billion offer for Time Warner.

Then there’s Murdoch involvement again, with BSkyB’s attempt to create a trans-European pay television giant with the £5 billion offer for Sky Deutschland and Sky Italia, already controlled by Murdoch’s Fox. In another interesting twist this week Sky has also bought a 70 per cent stake in Love Productions, the company that makes Benefits Street and the Great British Bake Off.

It’s not all about Murdoch – well not entirely – with US telephone leader AT&T interested in acquiring former Murdoch-owned satellite television company DirecTV in a $48.5 billion deal.

At the diminutive $1 billion a pop end of the market we have Liberty Global first selling Chellomedia to AMC Networks – i.e. getting out of programming to concentrate on increasing its broadband speeds offered to its 25 million cable subscribers across Europe including Virgin in the UK.

Then just when we had got that perfectly logical strategy worked out Liberty boss Mike Fries goes for the reverse ferret and pays £481 million for a 6.4 per cent stake in ITV after already joining up with Discovery to buy top British independent All3Media in a £500 million deal.

Then we have got Scripps, the food and lifestyle network company from Knoxville, Tennessee prepared to pay £500 million for the 50 per cent of a rapidly-expanding UKTV it does not already own and currently held by the BBC’s commercial arm, BBC Worldwide.

Not to be outdone, Viacom has given Richard Desmond the odd £450 million for Channel 5.

We can only be grateful that, so far at least, neither the BBC nor Channel 4 is up for sale – although you have to watch politicians carefully in everything.

What is going on here and where will it all end?

Some of the patterns are almost too obvious to mention. Just as the Americans are at last starting to get an appetite for “soccer”, so the multi-channel American media players are starting to get an increasing taste for the flesh of British television companies and production companies in particular.

Many of the deals are coming from America, but why now when they have resolutely ignored UK assets such as ITV when its share price was absurdly undervalue and could have been bought by a bunch of cloud-funders, if such a concept had been available at the time?

It may be something to do with a change in mood at the end of recession and the fact that the US media market is relatively mature. There will probably be a tax angle somewhere such as being able to offset overseas investments against US profits.

The biggest momentum, apart from opportunism, behind the apparent aggression could actually be defensive – being sure that you get more control of scarce, top-quality content while at the same time going for increased scale in the face of unimaginably well-financed potential rivals in the shape of Google, Facebook and Amazon.

The defensive theory, which will be widely deployed, is also very convenient and can be used copiously whenever an economic regulator approaches. What do you mean an $80 billion deal is monopolistic?

Compared with Google, Facebook and Amazon we really are very, very, small indeed – and anyway, the consumer will benefit from the resulting economies of scale.

The same arguments will be used to justify consolidation between phone companies and satellite television companies as in AT&T and DirecTV.

What will happen if, as seems likely because of the corporate connections, BSkyB will indeed manage to swallow both Sky Deutschland and Sky Italia, and then BT pounces on the lot?

The resulting mammoth deal would certainly raise eyebrows at competition authorities in both London and Brussels but would still be considerably smaller than Google.

That would probably be a step too far, but turning itself into a trans-European pay-TV giant would help protect Sky from any damaging loss of Premiership football rights to BT and maybe even help to head off a bid for the company itself.

The overall tone of the current round of deal-making will, in the end, be set by Rupert Murdoch with the help of his man on earth, Chase Carey, who runs the film and television part of the Murdoch empire in the US.

The $80 billion was merely the first prod of the stick through the bars. Murdoch has always been willing to pay a high price – some would say overpay – for something he really wants.

This one he really wants as the culmination of a media career that began more than 60 years ago when he was summoned back from Oxford to Australia to run the family newspaper in Adelaide on the death of his father Sir Keith Murdoch.

Apart from anything else the deal would give Murdoch control of two Hollywood studios.

It will come down to price in the end, and that price will probably be agreed privately by institutional investors who hold stock in both companies.

You can guess that it will have to get close to $100 billion for Time Warner investors to start rolling over to have their stomachs tickled.

The future of ITV is a little more difficult to predict but it is hard to believe that the purchase of a 6.4 per cent stake for £481 million is just a minor piece of financial opportunism by Liberty Global.

Someone else could bid and Liberty would then pocket a nice little turn – £150 million or so profit.

Nothing will happen for now and possibly nothing apart from endless speculation well into next year.

But the music will stop eventually and when it does ITV will probably be in American ownership – possibly Liberty on its own or more likely with broadcasting partners.