What's going on?
It’s a bidding war! Rupert Murdoch’s 21st Century Fox is reportedly nosing its way into the competition to acquire one of the largest owners of TV stations in America. (Tweet this)
What does this mean?
The TV company Sinclair has, as of a few weeks ago, been in discussions to merge with Tribune Media (the pair own some of America’s most-watched local TV stations). The desire to join forces has been spurred on by recently eased rules on mergers in the American television industry. While TV stations typically have to give a portion of their advertising revenue to cable networks like NBC and Fox in order to broadcast their shows, a merger would give Sinclair and Tribune a stronger hand in negotiating just how much they’ve got to pay out.
But Rupert Murdoch’s 21st Century Fox (the owner of American cable network Fox) has reportedly stepped in with Blackstone, a big investment firm, to put forward a counter-offer to purchase Tribune. Fox is planning to combine its TV stations with Tribune’s in order to get some of those benefits for itself.
Why should I care?
For you personally: The climate looks good for mergers and acquisitions in the TV industry.
The deregulation of TV mergers has reportedly sparked a big push towards mergers and acquisitions in the American TV industry. That has already pushed up the stock prices of some companies likely to be merged and/or acquired. As media reports of Fox’s entry to the bidding process emerged on Monday, Tribune’s stock jumped 6%!
The bigger picture: This is how deregulation can lead to more profits for companies.
In theory, with fewer rules and regulations from the government, companies should have an easier time making profits. For example, by being allowed to join forces, owners of TV stations can cut their overlapping costs and have more power to negotiate the fees that networks charge them – both of which should lead to higher profits.