"In the media industry, it’s once again important to be big," write Keach Hagey and Shalini Ramachandran in the Wall St. Journal’s Markets Pulse column (Warning: the WSJ is behind a pay-wall and may charge you to read this article).
The article continues, "Tribune Co’s $2.73 billion agreement to buy Local TV Holdings LLC’s 19 television stations, unveiled Monday, is the biggest in a spate of TV station acquisitions that so far this year totals nearly $9 billion, according to SNL Kagan.
"These deals, along with signs that cable-TV executives are looking to spark a consolidation wave in that industry, signal a sea change in the media sector. After a decade in which media industry deal-making was heavily concentrated on unwinding mergers struck in the past, executives once again have an appetite for acquisitions."
So what’s going on?
Says the article, "[T]hese deals are concentrated on the distribution side, among TV station owners and potentially cable operators [and] reflect a recognition that with growth in pay television slowing sharply, economies of scale are vital."
The piece continues, " ‘Our investment thesis is simple: scale matters,’ said Tribune CEO Peter Liguori, during a call with analysts Monday morning. Or as Liberty Media Corp. Chairman John Malone, a pioneer of the cable industry, put it last month, ‘the whole name of the game in the cable business is scale.’ "
The story then explains, "The twist is that both station owners and cable operators are hoping that bulking up will improve their bargaining leverage with each other."