For blue-chip and mid-market TME companies, convergence is the new watchword, according to Reed Smith’s report Wired Up: The convergence of technology, media and entertainment
As the race for audiences intensifies, technology, media and entertainment (TME) companies find themselves locked in an increasingly fierce battle for the competitive high ground. Cross-sector convergence – expanding beyond traditional core activities to acquire new capabilities – is a vital weapon in that battle.
And the figures show that TME convergence activity has rapidly gained steam. According to the latest data, 2014 saw deals worth more than US$34.5bn – an increase of 11% on 2013. Transaction volume rose even more dramatically, with 326 deals in 2014, up more than 52% on the previous year.
And convergence delivers dividends, with the likes of Amazon, Apple and Google reaping the benefits. Despite their different origins – Amazon in ecommerce, Apple in devices and Google in internet search – each business now offers products and services that reach far beyond its original core. All three are now TME businesses. Every base is covered.
The urge to converge is by no means monopolised by global giants. The recent upsurge in so-called ‘quad play’ deals – those in which telecom providers seek to become a one-stop shop for TV, broadband, fixed and mobile telephony – underlines the continuing allure of convergence as businesses race to make sense of a world in which the boundaries between technology and content are becoming increasingly blurred.
The advent of aggregated data and programmatic buying has also created additional incentives for tech companies to merge with content.
According to William Doran, partner at Reed Smith: “Convergence is generating a continued drumbeat of buying pressure, particularly for firms that need to reformulate their strategies to stay competitive. These firms feel the need to acquire because there is often not enough time or the ability to develop internally. That buy-side pressure is going to keep valuations up and rising.”