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How Sun Valley is Jumpstarting a Mad Scramble for Media Content

NEW YORK (TheStreet) -- "Content is not just what's on Comedy Central," Herbert Allen III, the publicity-shy head of the boutique media investment firm Allen & Co., said back in 2009. "Content is Facebook too. Content is how the consumer chooses to spend time."

Allen was speaking to Ken Auletta for his book Googled: The End of the World as We Know It, but he could have been speaking this week to the attendees at his annual exclusive gathering of industry heavyweights in the rarefied environs of Sun Valley, Idaho.

Content is indeed about time, and time is money, or more specifically, online advertising dollars. And everyone, not just traditional entertainment companies, want to own content. These days, that can mean content production, a business Netflix  (NFLX) and Yahoo!  (YHOO) are sinking more money into, or purchasing a larger slice of distribution, as Comcast (CMCSA) and AT&T  (T) are attempting to do with the proposed acquisition of Time Warner Cable (TWC) and DirecTV (DTV), respectively.

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Content is what everyone wants, which makes a smallish company such as Scripps Networks Interactive (SNI), owner of HGTV, the Food Network and the Cooking Channel, very attractive. Yet with a market capitalization of $11.7 billion, Scripps shareholders as well as Chief Executive Kenneth Lowe, may be looking for a premium that is rich even by today's standards.

Nonetheless, the Allen & Co. gathering is not without a history of dealmaking. The event has played matchmaker a year ago to Amazon  (AMZN) chief Jeff Bezos' purchase of The Washington Post, and Comcast's deal with General Electric  (GE) for NBC Universal in 2009 (a partnership it later bought outright).

Acquiring content remains the focus of media, entertainment and technology companies eager to secure steady subscription fees as well as digital advertising.

"The future is bright for those who can make the best content but also start to curate some of the best content," Avi Savar, founder and chief strategy officer of Big Fuel, told TheStreet. "There's no distribution value unless the content itself is good." This, then, is where the power plays in the industry are currently focused.

But content is a tricky business. Arguably, the Internet has provided no shortage of content. In fact, some see a glut of information. The limited resource to be fought over is consumers' time and attention.

Consider that 90% of existing data in the world today has been created in the last two years alone, according to IBM Analytics estimates. The onus, then, is on content providers to deliver something of value to a consumer so spoiled for choice.

"There's always been this tug-of-war between which is more valuable: content or distribution," said Drew Wilson, media analyst at Fenimore Asset Management, in a phone interview. "Content, it would seem, has got the upper hand in the last couple of year." As programming costs for content have increased, so too have advertising rates and carriage fees programmers can charge.

The presence of non-traditional media companies such as Facebook  (FB) and Google  (GOOGL) are in Sun Valley also reflects the splintering of distribution as companies seek to catch-up with Netflix and Amazon, argues Barclays analyst Kannan Venkateshwar in a July 8 investor report.

"We believe the programming cost increased because so many of these distribution channels are owned by multi-channel video programming distributors, and the number of rights needed for the same content has increased," Venkateshwar said. "As a result, distributors are paying more for content." 

Distributors like Comcast, Amazon and Yahoo! are either delving into content production or taking the path of consolidation to increase their ability to produce programming that consumers will want to access on their portable devices. The flurry of deal-making seen over the last few months has focused on the latter, most notably between Comcast/Time Warner Cable, and AT&T/DirecTV. 

"These are essentially a response not only to the growing relative power of content but also just to the dilutive aspects of audience fragmentation," Wilson said.

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