Media moguls will gather at Allen & Co. Sun Valley’s annual retreat amid streaming rethinking and economic woes

The mountains are more beautiful than ever, the business climate is not quite as good as that of the Allen & Co. investment bank boutique in preparation for the annual Sun Valley retreat. After the arrival of the guests on Tuesday, the official acts begin on Wednesday.

The media mogul’s annual ritual of rafting and shopping talks is a 40-year tradition after July 4th. It was discontinued in 2020 during the worst of Covid, but returned last year in a stripped down, masked and waxed version shortly after the announcement of two major deals: the Warner Media / Discovery merger and the planned acquisition of MGM by by Warner Bros Amazon. The first comment by then Discovery CEO David Zaslav at a Sun Valley press conference a year ago: “It’s not over yet.”

He is now the new CEO of Warner Bros. Discovery and is likely to be more cautious as the heavily indebted company struggles to meet promised cost savings of $ 3 billion and, along with his peers, against a brutal stock market, Wall Street. . Rising inflation, rising interest rates and possibly a looming recession. Zaslav’s presence is confirmed alongside that of WBD’s head of revenue and strategy, Bruce Campbell, we know.

The two deals have left the media baffled as to who lost and what could be next. Paramount (known a year ago as ViacomCBS) wanted a big deal, as did Comcast, parent of NBC Universal. They both watched Warner Media. Paramount’s non-executive chairman and majority shareholder Shari Redstone will be returning. Executive Director Bob Buckish was invited but was unable to attend.

Fox CEO Lachlan Murdoch and COO John Nallen confirmed. So are Sony Group Corp. CEO Ken Yoshida and PlayStation CEO Jim Ryan. Both Casey Wasserman and Mike Freese.

Not all guests will attend. But Rupert Murdoch is a regular and Bob Chapek, with a new three-year contract in hand, was there last year. Tech CEOs are also invited, including Elon Musk, Apple’s Tim Cook, Meta’s Mark Zuckerberg, Amazon’s Andy Jass, and Alphabet’s Sundar Pichai. The list includes a variety of media leaders, companies that could or would have banked with Allen & Co., and corporate executives who are clients.

Putting executives together and in khakis, the Sun Valley conference was seeded for mergers, from Disney’s 1995 purchase of CapitalCities / ABC to Amazon founder Jeffrey Bezos’ purchase of The Washington Post in 2013.

For guests Reed Hastings and Ted Sarandos, co-CEO of Netflix, Allen & Co., the last year since 2021 has made a difference. Its shares have plummeted 70% since the beginning of the year after losing subscribers for the first time last quarter, announcing that it would lose more in the quarter ending in late June, and suddenly revealing its intention to launch a service supported by the company. advertisements even when he fired staff. . As a result, Netflix is ​​increasingly seen as an acquisition target, an unusual change.

Independent Netflix “is gone,” predicted a financier. It is a very valuable platform, but “it is no longer a story of growth”. Hastings and Sarandos “did not live up to Street’s expectations” and lost several hundred million dollars in market capitalization in one fell swoop, he said, referring to their latest post-earnings video call when co-CEOs have discussed the lack of subscribers.

Over the next 18 months, “the environment will become clearer,” he said.

This also refers to the period in which buyers can consider purchasing to purchase WBD. This deal structure would result in a hefty tax penalty for any buyer within two years of closing.

What will happen until then is unknown. Netflix’s effect has spread to shares of other streaming services as investors question the economics of high-cost, but low-profit business. Meanwhile, pent-up demand, the Russo-Ukrainian war, and protracted supply chain problems related to Covid have fueled extremely high inflation. A corresponding hike in interest rates by the Federal Reserve risks a recession, a fear that has carried over into advertising and could spread to other entertainment sectors.

As a result, the Allen & Co. crowd is rallying after the S&P 500 finished its worst first half of the year since 1970, down more than 20%. Worse was the Nasdaq, which lost nearly 30%, while the Dow lost 15%. Tech stocks were the hardest hit, but the media underperformed broader markets as the second quarter ended yesterday.

The offers are still in the news. A long-gestating CAA-ICM merger was recently completed (Allen & Co. recommended CAA). Elon Musk’s Twitter deal (Allen recommends Twitter) and Microsoft’s acquisition of Activision Blizzard (Allen recommends Activision) are pending.

But PwC’s M&A Outlook recently predicted a slowdown in major media mergers and acquisitions, which appeared to be on the rise last year, due to low stock prices and high interest rates. Equity payments are now limited and debt market access is more expensive. Companies don’t like to sell at low levels.

Endeavor yesterday reduced its $ 1.2 billion stock and cash purchases for the sports betting platform OpenBet from $ 400 million to $ 800 million.

And he’s not always right, but he’s not alone: ​​Zuckerberg would have told Meta staff today that “if I had to bet, I’d say this could be one of the worst recessions we’ve seen in recent times”.