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Viacom, DirecTV and a Corporate Takeover That Makes Sense

Mergers and acquisitions has to become the name of the game in the space. U.S. regulators -- not much else --stand in the way of content owners and network providers making the logical choice by consolidating. That might be an impossible hurdle to overcome.

Precedent, however, does exist. In the United States, the Federal Communications Commission, over the course of the last 15 to 20 years, not only permitted but facilitated and encouraged a massive amount of consolidation in the radio business. It relaxed ownership limits -- with the full support of then President Clinton -- and approved mega-mergers left and right.

These decisions left radio listeners with an inferior, cookie-cutter product dominated by fewer than a handful of companies. Interestingly, the weak regulation rendered broadcast radio irrelevant, relative to new media, particularly Internet radio. Radio companies effectively stopped competing against one another, failing to react, until recently, to new and innovative threats.

There's also precedent in Canada. I have written about it extensively on TheStreet. Rogers Communications (RCI) and BCE (BCE) rule the media and telecommunications spaces in the country.

My article tells much of the story. In a nutshell, Rogers and Bell own the delivery systems (e.g., wireless, cable, satellite), the media outlets (e.g., regional and national networks, including sports) and all or part of Canada's most important sports teams (e.g., Toronto Maple Leafs, Toronto Blue Jays, Toronto Raptors, Montreal Canadiens). While American media and telecom companies could never reach anything that even approaches this size or scale, they should try.

What amounts to a partnership between Rogers and Bell (no matter how much they play up their fierce competition in the media) is quite possibly the biggest story that investors ignore. American media and telecom executives should pay attention and take notes as well.

In terms of size, Viacom ranks in between smaller (and regional) MSG and larger media conglomerateComcast (CMSA). These three companies need to find a way to hook up, preferably through M&A, but, at the very least, via partnership.

CMCSA Revenue ChartCMCSA Revenue data by YCharts

The Feds would have none of it.

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