Wissenschaft und Forschung an der HdM

Vortrag

Betting on the future for the digital- and media industry.

An analysis of the investment and acquisition strategies of 25 leading companies.

Abstract

Starting in the era of the so-called New Economy (around the year 2000) and, after a brief period of disillusionment, increasingly again from the 2010s onwards, company acquisitions and equity investments in startups have become a central component of the competitive strategy portfolio (Jansen, 2016; Klein, 2017) - both in the digital and media industries (van Kranenburg & Ziggers, 2018). The underlying objectives behind such investments can be manifold: gaining insight into the technologies of the future, taking advantage from know-how transfer, acquiring technology patents in order to integrate these technologies into products and services, or to benefit financially from the increasing value of the startups or ventures (Hassan et al., 2018; Trautwein, 1990; van Kranenburg et al., 2004). Expanding one's own product portfolio or striving for diversification may also be reasons for acquisitions and investments (Chan-Olmsted & Chang, 2003; Noam, 2019; Teece, 2010). Innovations resulting from these investments and acquisitions are of great importance for the long-term success of digital and media companies as it creates lasting advantages (Gershon, 2018).

Since acquisitions and equity investments are always bets on the future and should contribute to future-oriented strategies and goals, analysing these investments can help anticipate future developments in the industry and identify upcoming trends.

Against the background of the situation described above and with reference to the subject of the Annual Conference of the European Media Management Association, the aim of this study is to develop future trends for the digital and media industry. The study presents (1) technology investment strategies of 25 leading companies from the digital and media industry. With their ecosystems, they are significantly shaping the media markets and determine the media usage behaviour of consumers. As tech giants, they are considered pioneers in new products and services, serve as media gatekeepers and have a global reach. Further, based on the technology investment activities (equity investments and acquisitions), the study provides (2) an outlook on the technologies that will be critical for future success in the digital and media industry. A technology deep dive takes a closer look 36 technologies with a high relevance for the future of the industry. Among other things, it determines which technologies have a strong interconnection to other technologies. This is followed by (3) an overview on potential growth sectors and on directions for diversification for the industry.

The exploratory analysis conducted here is based on data from the Crunchbase platform, which has been increasingly used for economic and management research in recent years (Dalle et al., 2017). Acquisitions and equity investments over the past 12 years (from 2010 to 2022) were analysed. The technologies to be considered were selected using Gartner Hype Cycle of Emerging Technologies (GHC): All technologies ever listed as emerging technologies on the GHC and were simultaneously differentiated within the Crunchbase platform are taken into account. In sum, 1,062 acquisitions and 7,456 equity investments by the leading 25 media and digital companies have been analysed.

In terms of technology investment activities, Artificial Intelligence, Machine Learning, Software-as-a-Service, Biotechnology, and Big Data have been the top technology investments for leading companies over the past 12 years. These technologies are highly interconnected and serve as a key link between different (other) technology areas. Obviously the digital- and media companies strongly believe in a future, where Artificial Intelligence and Machine Learning as well as Software-as-a-Service will be highly relevant for being successful and for being competitive. They invest their money in these technology fields. They make a bet on that future. Both, in their own portfolio (because they acquire start-ups and companies within that technology field) and in terms of equity investments - they obviously believe to get a return on these investments in the future. While Artificial Intelligence and Machine Learning as well as Software-as-a-Service are not really a surprising result it is more interesting that Biotechnology seems to be a technology, media and digital companies are getting more and more interested in.

When it comes to the interesting sectors, digital- and media companies heavily invest in companies and start-ups from the software and information technology sector. These are of course related sectors for the observed industry and do not serve as a diversification strategy - at least considering the sample of the 25 companies. However, unrelated sectors such as Science and Engineering, Health Care, and Financial Services are obviously also of interest for the digital- and media industry - as a field for diversifying. Media and Entertainemnt is no longer a highly relevant sector for the major players in the digital and media industry in terms of equity investments. Other sectors are apparently expected to perform better in the future, and thus providing a better return on investments. This has changed in recent years insofar as the Media and Entertainment sector was ranked second in terms of attractiveness until 2016. As an acquisition target – and this is a reassuring realization – start-ups and companies in the Media and Entertainment sector are still highly relevant for the large companies in the digital and media industry.

In addition to the descriptive results, which include a description of the investment strategies and possible common patterns of investment behaviour, this study may be useful for media companies (both old and new) to prepare strategically for the future using the technology investment profiles and identified trends. Additionally, the findings of this study may point to new and interesting fields of research or the scientific community. 

 

References

Chan-Olmsted, S. M., & Chang, B.-H. (2003). Diversification Strategy of Global Media Conglomerates: Examining Its Patterns and Determinants. Journal of Media Economics, 16(4), 213-233.

Dalle, J.-M., Den Besten, M., & Menon, C. (2017). Using Crunchbase for economic and managerial research (OECD Science, Technology and Industry Working Papers 2017/08; OECD Science, Technology and Industry Working Papers, Vol. 2017/08). https://doi.org/10.1787/6c418d60-en

Gershon, R. A. (2018). Media Innovation: Three Strategic Approaches to Business Transformation. In A. B. Albarran, B. I. Mierzejewska, & J. Jung (Eds.), Handbook of Media Management and Economics (Second Edition, pp. 241-272). Routledge.

Hassan, I., Ghauri, P. N., & Mayrhofer, U. (2018). Merger and acquisition motives and outcome assessment. Thunderbird International Business Review, 60(4), 709-718. https://doi.org/10.1002/tie.21967

Jansen, S. A. (2016). Mergers & Acquisitions: Unternehmensakquisitionen und - kooperationen: eine strategische, organisatorische und kapitalmarkttheoretische Einführung [Mergers & Acquisitions: Corporate acquisitions and cooperations: a strategic, organizational and capital market theoretical introduction] (6., überarbeitete und erweiterte Auflage). Springer Gabler.

Klein, M. (2017). Erfolgsfaktoren technologieorientierter Wettbewerbsstrategien [Success factors of technology-oriented competitive strategies]. Duncker & Humblot GmbH.

Noam, E. M. (2019). Managing Media and Digital Organizations. Springer International Publishing. http://link.springer.com/10.1007/978-3-319-71288-8

Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning, 43(2), 172-194. edselp.

Trautwein, F. (1990). Merger motives and merger prescriptions. Strategic Management Journal, 11(4), 283-295.

van Kranenburg, H., Hagedoorn, J., & Pennings, J. (2004). Measurement of International and Product Diversification in the Publishing Industry. Journal of Media Economics, 17(2), 87-104. ufh.

van Kranenburg, H., & Ziggers, G. W. (2018). Mergers and Acquisitions and their Performance. In A. B. Albarran, B. I. Mierzejewska, & J. Jung (Eds.), Handbook of Media Management and Economics (Second Edition, pp. 201-218). Routledge.

 

Mitvortragende: Magdalena Ciepluch
Vortrag auf Veranstaltung: 2024 Annual Conference of the European Media Management Association (emma)
Veranstaltungsort: Leeuwarden (NL)
Datum: 05.06.2024 bis 07.06.2024

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