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Some will say 2006 was the year of Mergers and Acquisitions.  The big five Wall Street investment banks (Merrill Lynch, Bear Stearns, Goldman Sachs, Lehman Brothers, and Morgan Stanley) had record profits.  The total value of acquisitions topped $4 trillion, easily besting 2000’s record $3.3 trillion according to tracking firm Dealogic.  Private equity firms accounted for more than 18 percent of that total by spending more than $720b to take companies private.

As news and analysis of the year trickles out, some are reporting that these same firms have more than $2 trillion in buying power going in to 2007.    

A small sampling of deals from the past year:

Two Tech infrastructure giants bought themselves greater involvement in Internet media distribution:

• IBM acquired Micromuse for $865 giving it additional software for managing video on the web. 
• Cisco acquired set top box maker Scientific Atlanta for $5.3b, thereby positioning Cisco for IPTV markets.

Old school animation and new digital methods officially married:

• Disney acquired Pixar for about $7.4b thereby increasing its resources for digital animation and providing it with a stronger footing to compete against companies like Dreamworks Animation and Imagi.

Newspaper publishers considered consolidation strategies as online services continue to encroach on their traditional offerings:

• McClatchy acquired Knight Ridder for approx $4.5 plus assumption of $2b in debt, thereby significantly increasing its newspaper publishing

Internet video got competitive and Google went shopping for…just about everything?:

• YouTube (for $1.65b)

• dMark (radio advertising platform for $102m)
• Measure Map (blog analytics)
• @Last software (Sketchup c.a.d application)
• Jotspot (wiki’s)
• Neven Vision (biometric identification- for use with Picasa photo archiving)

Privacy makes management easier: Radio and Major media ranking and review companies went private:

• Private equity firms including KKR, Thomas Lee Partners and the Carlyle Group acquired the shares of Dutch conglomerate VNU with the intent to privatize the company and improve its performance.  VNU holds, among other properties, media research and ranking firms ACNielson, Billboard and Net Ratings.  The company also publishes the Hollywood Reporter, Adweek, Billboard and other magazines.
• In a separate, but huge, pending deal, private equity companies are trying to acquire Clear Channel, owner of over 1100 Radio Stations among other entities for over $18b

It’s not unlikely that in 2007, private equity firms will play an even larger role in the media and entertainment sector than they have in the past few years.  Established companies will continue to have to evaluate what represents core and strategic businesses amidst changing technologies and may seek to divest non core, or under performing, areas, or acquire other pieces for the future. 

Areas that generate solid cash flows like gaming, publishing, broadcast and content catalogs are likely to get some speculation and scrutiny.

Tomorrow, after I’ve had more time to think about it, I’ll have some analysis about what this might mean besides the obvious prediction that there will be a lot of M/A activity in 2007 and at least a few large private equity investments.

The end of every year always begs a quick recap summarizing what happened in the prior 12 months.  For these past months: 2006 was the year of Internet Video

YouTube, blogs, and other forms of user-generated content were a major part of what happened in the land between media, entertainment and technology in 2006 but video led the way.  

With activity from startups to conglomerates, somewhere during the course of the year user generated content more than passed in to the mainstream.

An advertisement in today’s Sunday newspaper solidifies just how far things have come.  Dove, the decidedly non-cutting-edge maker of soaps, called for people to go online and submit a homemade 30-second TV spot for Dove’s newest product.   The winning video spot will be aired during a commercial break in the Academy Awards in February. 

The tagline for the ad: “Be real. Go online. Get on air.”

Looking ahead, copyright issues and distribution competition may continue to slow the availability of (legally) downloadable full length movies and video (and cause legal headaches for major players like YouTube who get trapped in copyright issues) .

But, looking back, with user generated content, outtakes and shorts leading the way:  the impact of Internet Video during the past 12 months was unmistakable.

The holiday sales are over, the after holiday sales are on, and while the verdict on the leading standard in higher capacity, higher quality High Def DVD media remains undecided, the following is an impromptu, and largely unscientific, survey to see which format is leading.

The methodology is simple: Using Amazon’s sales rankings, I have taken titles from their sales list and compared the price and sales rank for the same title in each of the three formats: standard DVD (widescreen or fullscreen as noted), BluRay and HD DVD.

I’ve tried to pick titles that hit a mix of demographics by choosing from five categories: the romantic comedy, the sci-fi techy fantasy, the action flick, the comedy, and the drama.

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Starting notably with Terry Semel leaving Warner Brother’s and taking on the role of CEO and Chairman of Yahoo in 2001, major web properties have increasingly embraced leadership from executives developed in the ranks of traditional media.  The similarities between the two industries, and the increasing need for their two worlds to work together, makes the logic understandable; even when critics question the less entrepreneurial nature of traditional media.   

In November, Time Warner’s AOL unit, hired Randy Falco as its CEO.  Prior to his hiring Falco spent 30 years at NBC, most recently as President of the Universal Television’s Network Group.   Given the television background, it was only a short matter of time before a TV meets Internet deal happened.  

Not long after Falco’s hiring, Time Warner siblings HBO and AOL shook hands across the family dinner table and announced a deal to partner on an Internet channel called “This Just In.”

The effort is particularly notable in that it marks HBO’s first effort to play online besides at its HBO.com property. Click to Read More

The jury is still out on who’s been naughty or nice. Santa and Hanukkah Harry are still divvying up gifts for distribution. Rudolph’s off somewhere recharging the batteries for his nose.  But a year is about to end and another to begin, so before anyone gets crazed under the mistletoe, or confused by the unseasonably warm weather in parts of the world, I’d like to throw out 10 gift suggestions, in case people don’t want to shop from my Amazon Wish List:

1. A fiscal quarter without a major accounting or legal scandal.
2.  A software update for my 5th Generation iPod that gives it the alphabetic search functionality announced in September for the 5.5G iPod.  Don’t penalize me for buying my iPod three months too early (I’d have waited but my 4th generation Ipod crashed and died after an update).  C’mon, we all know having to scroll from AC/DC to Modest Mouse before getting to Springsteen is an un-Apple-like cumbersome process.  You have the solution on a virtually identical product.  It’s just a software upgrade.  The web bulletin boards have been begging for it for months.  Look after your fans.  A little help Mr. Jobs? 
3. My dream Ipod (see yesterdays post)
4. A single accepted standard for High Definition DVD – I mean, BluRay? HD-Dvd?…I know the stakes are high and it’s a battle but the biggest loser right now is the consumer.  Can’t we all just get along?
5. A year when ticket prices – for movies or concerts or sporting events – don’t rise at a rate well above the rest of the Consumer Price Index.  If not, at this rate, sooner than later the classic Dinner and a Movie date is going to be just one or the other.
6. A viable means for sorting through the overwhelming volume of information now thrown at us.  Between the emails, the blogs, the daily newspapers, TV, radio, podcasts (if anyone actually has time for them), (and not to mention advertising) there’s barely enough time in the day to read the sports pages before the day is over.  Isn’t technology supposed to make life easier? I’m getting information overload.  As it stands, it’s the carpal tunnel syndrome for the next generation.
7. Legally downloadable movies – (full length videos, not just clips) – in DVD or better quality that I can play on my TV or my computer, or if I want, burn to a disc to watch later.   No more DVD by mail or rental store (sorry Netflix and Blockbuster but one of these days distribution has to catch up with technology no matter how much Digital Rights Management issues (DRM) and conflicted Entertainment Conglomerates slow the process)
8. A dinner date with Natalie Portman…or Cameron Diaz…or Claire Danes…or Jessica Alba …or Audrey Tautou…  really, I’m not that picky…I’d even cook.   (And if none are available -  I would graciously settle for a group dinner with any combination of the previous along with maybe Robin Williams, Steven Spielberg, Michael Crichton, Bono, Oprah and Uma at the table? I’d happily cook for the whole group too….unless Thomas Keller wants the job.)
9. A top ten ranking for Metue in the blog traffic reports or top 50 for a few consecutive months.
10. [this space is reserved for something I'll think of later….hindsight being 20/20 and all]

I’m addicted to my Ipod.  I admit it. It’s an addiction and I have a problem. I had two before this one, both 4G’s (4^th Generations), and they both crashed, froze and failed: one randomly during a routine firmware upgrade.  Still, as frustrated as I was that Apple’s software screwed me, like any addict, I ignored the frustrations and threw them more money for a 5G video Ipod.   I’m bitter about the past failures, and annoyed that the Instant Search functionality given to the 5.5G in September hasn’t been made available for the rest of the 5G iPods.  It’s frustrating to be penalized a feature for buying a product a month too early…still, I come back for more.   I’m addicted.  I recognize I need help.

But this being Silly Season, and my addiction running at full strength, I’ll get help later– Instead I’d like to put forward  my amateurish rendering of an ideal Ipod.  Some of its features:

• a touch screen controlled, wide-screen, interface with mostly virtual controls including an interchangeable virtual click wheel and virtual keyboard.  (Rumors of a virtual click-wheel, hinted at by patent applications have been floating for a while. Further rumors of a coming apple phone product with a touch screen keypad hint the iPod may go that direction eventually. Here’s to hoping the grapevine is accurate!)
• Two fixed button on the side, along with the classic lock slider, are the only non-virtual controls on the gadget.  The buttons allow me to toggle between a horizontal or vertical image layout. They also allow the user to toggle between a virtual click-wheel, and a virtual keyboard.  Additional uses of the fixed buttons include: scrolling through letters on the keyboard (for when I don’t want to use the touch-screen), an alternate means of navigating menus, or they can be used for volume or other settings as I might configure (That’s right, user configurable control buttons with Apple’s famous easy configuration…..how nice would that be?).
• For novelty, icon’s on the device can be replaced with my own pictures or from a library of available choices (even available for a small fee would be ok), all through iTunes.  There’d be no need, nor any risk of hacking the firmware, and invalidating a warranty, to personalize our toys.
• A microphone input and a small speaker – maybe for an integrated cell phone (assuming it can be incorporated in the same size footprint or smaller and also assuming Apple would allow the competition in function with their planned iPhone). A microphone would also help with voice recording (memo’s, notes etc), or voice activated commands…or just to annoy the person next to me on a plane?
• Integrated Wifi and/or Bluetooth. (Bluetooth wireless integration into a car stereo, or home stereo would be very nice indeed.)
• Supported wireless earphones would be cool.
• While at it, be nice if I could use it as a universal remote for my home electronics and if it streamed (via that integrated Wi-Fi or Bluetooth my music to my stereo wirelessly.
• If it could make popcorn that would be great too but I can live without that until the next generation hits the market.

These are just some thoughts….   If anyone at Apple would like to discuss them, I’d be happy to participate in a conversation. I’d even suffer through being an Alpha or Beta tester if they wanted.

The standardization debate over format for higher capacity, high def dvd’s is still boiling and the battle lines still being drawn.  Depending on whom you ask, and what data you measure, either of the competing formats is winning.

BluRay, with about 50gb storage, is backed by, among others, Panasonic, Mitsubishi, Phillips, Pioneer, LG, Dell, HP and championed by Sony.  It has generally non-exclusive support from its affiliated movie studios like MGM, Disney, Buena vista etc.  HD DVD, with about 30gb storage capacity per disc, is backed primarily by Toshiba, Nec and Sanyo on the technology side but it has Paramount, Universal and Warner brothers (including New Line) planning to offer content.

Ultimately, consumers will determine the victor – and it will almost certainly be price and available of content, not technology that influences their decision.  

With that noted, is the holiday season’s  introduction of Sony’s newest flagship gaming platform with included Blue-ray player, the PS3, more about the gaming for the player, or the gamesmanship in industry? 

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