When Bennett Coleman, which publishes the Times of India, paid US$98 million to buy the UK's Virgin Radio, it confirmed what many in this region had predicted: that the outward flow of money from Asia to the West would begin to include media acquisitions.
At press time, India’s Reliance Entertainment looked close to finalising a deal with Steven Spielberg's DreamWorks to form a new film company, investing more than $500,000 to help DreamWorks break away from Hollywood giant Paramount Pictures. Meanwhile, it is believed that Zee Group has attempted to buy German broadcaster EM Sport Media.
While outbound investment has become a predictable phenomenon, in the media sector it remains new. Why is it expected to become more common?
1 The rule of law, transparency in business dealings, political stability, a quality talent pool and clarity in industry regulations make businesses based in the West attractive takeover targets.
"What we’ve got used to is people investing in our markets. We just have to get used to seeing it the other way around," says Marcel Fenez, global entertainment and media leader at PricewaterhouseCoopers. The weakness of the US dollar means buying in that country could be more attractive to cash-rich Asian media companies.
2 Who is ready to buy? Indian companies, with long-running European connections and a clear understanding among managers of how business in the West works, are currently among the most likely candidates for future acquisitions.
Outside India, Ravi Kiran, CEO South Asia at Starcom MediaVest Group, says that among existing media groups, the likes of Malaysia's Media Prima and Astro, and Singapore's MediaCorp, are highly likely to go West given their success and aggressive expansion within Asia. "These companies are establishing a footprint within Asia first and I won’t be surprised if their ambitions take them to the US and Europe in the near future," says Kiran.
Media Prima already has an interest in South Africa and re-launched ABC 5 as TV5 in the Philippines in July this year. Astro has equity in Indian radio broadcasting groups.
Kiran notes that all three are monopolies in their respective spaces, yet have been run professionally despite significant government and political affiliations. Other strong players are MBC of Korea, which already has an American subsidiary, and TVB from Hong Kong.
3 The ethnic media outlets in the West - those catering to audiences with Asian backgrounds and in Asian languages - are the obvious first targets for expansion, but buyers are not limiting their outlook. Kiran says it’s not only the best of the West that will attract Asian investors. Successful Asian companies will want to apply their models to struggling businesses too. "The Asian management style, which mixes conservatism and risk appetite in a way that most Western management theorists find difficult to understand, will be tested more and more in the West," he says.
4 Other potential targets will depend largely on the aspirations of both acquirer and acquired. In the case of Virgin Radio, for example, a key factor in the deal was Bennett Coleman’s desire to integrate radio with its internet strength. If this is any guide, the need for cross-fertilisation of experience between media will become more important.
5 Expansion won’t necessarily come easily. The differences in media business models, for one, should not be understated. Running a newspaper in India, where copies are practically given away for free, or an online site in China, were gaming can form the bulk of revenue, is many miles away from similar businesses in Western markets. The importance of sober analysis should not be clouded by an appetite for risk.
6 While restrictions on foreign ownership are strict and frequently changing in Asia, particularly in India and China, there’s a move towards relaxing such restrictions in the West. In 2006, Australia liberalised its foreign and cross-media regulations, and in Europe, the focus of restrictions tends to be on cross-media ownership and whether a single player has an overly dominant voice, rather than whether an owner is foreign or local.
What it means for…
MEDIA OWNERS
- The most obvious attraction is the addition of new contributors to the bottom line and spreading risk between economies that rely on different sources of growth.
- Acquisitions overseas also offer a chance to transfer expertise within organisations and, for staff at both the acquiring and the acquired company, to look at transferring to a new geography.
- Many Western firms invested early in digital media content; acquiring them is an easy shortcut for bringing some of that knowledge to Asia.
MEDIA AGENCIES
- In the short term, the impact will be minimal. With such disparate markets and products in the deals seen so far, there are unlikely to be package arrangements or discounts across regions at this stage. Concentration of media ownership emerging from these deals is too small to have any anti-competitive effect on pricing.
- However, in the long term there may be obvious benefits for global media buying organisations in dealing with international media owners.
At press time, India’s Reliance Entertainment looked close to finalising a deal with Steven Spielberg's DreamWorks to form a new film company, investing more than $500,000 to help DreamWorks break away from Hollywood giant Paramount Pictures. Meanwhile, it is believed that Zee Group has attempted to buy German broadcaster EM Sport Media.
While outbound investment has become a predictable phenomenon, in the media sector it remains new. Why is it expected to become more common?
1 The rule of law, transparency in business dealings, political stability, a quality talent pool and clarity in industry regulations make businesses based in the West attractive takeover targets.
"What we’ve got used to is people investing in our markets. We just have to get used to seeing it the other way around," says Marcel Fenez, global entertainment and media leader at PricewaterhouseCoopers. The weakness of the US dollar means buying in that country could be more attractive to cash-rich Asian media companies.
2 Who is ready to buy? Indian companies, with long-running European connections and a clear understanding among managers of how business in the West works, are currently among the most likely candidates for future acquisitions.
Outside India, Ravi Kiran, CEO South Asia at Starcom MediaVest Group, says that among existing media groups, the likes of Malaysia's Media Prima and Astro, and Singapore's MediaCorp, are highly likely to go West given their success and aggressive expansion within Asia. "These companies are establishing a footprint within Asia first and I won’t be surprised if their ambitions take them to the US and Europe in the near future," says Kiran.
Media Prima already has an interest in South Africa and re-launched ABC 5 as TV5 in the Philippines in July this year. Astro has equity in Indian radio broadcasting groups.
Kiran notes that all three are monopolies in their respective spaces, yet have been run professionally despite significant government and political affiliations. Other strong players are MBC of Korea, which already has an American subsidiary, and TVB from Hong Kong.
3 The ethnic media outlets in the West - those catering to audiences with Asian backgrounds and in Asian languages - are the obvious first targets for expansion, but buyers are not limiting their outlook. Kiran says it’s not only the best of the West that will attract Asian investors. Successful Asian companies will want to apply their models to struggling businesses too. "The Asian management style, which mixes conservatism and risk appetite in a way that most Western management theorists find difficult to understand, will be tested more and more in the West," he says.
4 Other potential targets will depend largely on the aspirations of both acquirer and acquired. In the case of Virgin Radio, for example, a key factor in the deal was Bennett Coleman’s desire to integrate radio with its internet strength. If this is any guide, the need for cross-fertilisation of experience between media will become more important.
5 Expansion won’t necessarily come easily. The differences in media business models, for one, should not be understated. Running a newspaper in India, where copies are practically given away for free, or an online site in China, were gaming can form the bulk of revenue, is many miles away from similar businesses in Western markets. The importance of sober analysis should not be clouded by an appetite for risk.
6 While restrictions on foreign ownership are strict and frequently changing in Asia, particularly in India and China, there’s a move towards relaxing such restrictions in the West. In 2006, Australia liberalised its foreign and cross-media regulations, and in Europe, the focus of restrictions tends to be on cross-media ownership and whether a single player has an overly dominant voice, rather than whether an owner is foreign or local.
What it means for…
MEDIA OWNERS
- The most obvious attraction is the addition of new contributors to the bottom line and spreading risk between economies that rely on different sources of growth.
- Acquisitions overseas also offer a chance to transfer expertise within organisations and, for staff at both the acquiring and the acquired company, to look at transferring to a new geography.
- Many Western firms invested early in digital media content; acquiring them is an easy shortcut for bringing some of that knowledge to Asia.
MEDIA AGENCIES
- In the short term, the impact will be minimal. With such disparate markets and products in the deals seen so far, there are unlikely to be package arrangements or discounts across regions at this stage. Concentration of media ownership emerging from these deals is too small to have any anti-competitive effect on pricing.
- However, in the long term there may be obvious benefits for global media buying organisations in dealing with international media owners.
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