Report: Consumption to Fuel Deals in ’13

Deal activity in the entertainment, media and communications sector is expected to be robust in 2013, as companies continue to seek ways to acquire more bandwidth to fuel growing content consumption, according to a report by PwC, the U.S. arm of international accounting and professional services giant PricewaterhouseCoopers.

Deal values in the sector rose to $96.2 billion in 2012 from $55 billion last year — after three straight years of declines — although volumes were down, according to PwC’s “2013 U.S. Deal Insights for the Entertainment, Media & Communications Industries,” released last week. Volume dipped to 839 from 931 in the prior year. Driving the value increase was Japanese wireless giant SoftBank’s pending $20.1 billion deal to acquire Sprint Nextel, a transaction that was interrupted earlier this month by Dish Network’s unsolicited $25 billion proposal for Sprint. Sprint is currently evaluating the Dish proposal.

Other top deals included Suddenlink Communications parent Cequel Communications’ $6.6 billion recapitalization and Comcast’s $3 billion sale of its 15.8% stake in A+E Networks to partners The Walt Disney Co. and Hearst Corp.

According to PwC, the advertising and marketing sector had the most deals — 184 — for the year, followed by communications (154) and Internet software and services (149). The cable sector had 15 deals for the year, according to PwC, down from 22 in 2011. The communications sector led the pack in terms of deal value for the year with deals totaling $43.5 billion, up from $26.9 billion in 2011. Recreation and leisure was next on the list with $10.6 billion in deals, up from $2.5 billion in 2011, followed by Internet software and services ($9.5 billion, up from $6 billion) and cable ($9.1 billion, up from $3.4 billion).

“EMC companies are re-evaluating their current portfolios and proactively executing on strategies that address the consumers’ shift to digital consumption,” said PwC U.S. entertainment & media deals partner Bart Spiegel in a statement.

PwC said it expects the growth to continue and added that deal value in the cable sector should rise in 2013 as operators look to monetize the shift toward increased digital consumption, grow their subscriber base and improve operational efficiencies.

“As more content is consumed digitally, there are increased concerns around bandwidth and the quality of the consumer viewing experience, which has prompted some companies to look for technologies to help deliver an improved digital experience,” PwC said in the report.

The year has already gotten off to a good start: Charter Communications agreed to purchase Cablevision Systems’ Optimum West systems in March for $1.6 billion; Liberty Media agreed to invest $2.6 billion in Charter stock in March; and Liberty Global agreed to acquire U.K.-based Virgin Media for $23.3 billion in the largest cross-border EMC deal so far in 2013.