NEW YORK ( TheStreet) -- Merger mania in media? Not so fast.
In years past, the announcement of a multi-billion dollar merger involving large cable-TV operators would invariably galvanize a horde of investment bankers to strategize other related acquisitions and sales.Yet, in the wake of last week's announcement that Charter Communications ( CHTR) plans to acquire Time Warner Cable ( TWC) in a deal valued at $55 billion, that may no longer be the case. A growing number of analysts and media executives say cord-cutting by subscribers in search of cheaper "skinny" bundles of channels has cooled interest from larger media companies in bulking up by buying content companies.
That could make it less likely that buyers will kick the tires of smaller cable network owners like AMC Networks (AMCX) or Scripps Networks Interactive (SNI), both frequently mentioned as potential acquisition targets.
"The larger media companies no longer get much leverage from simply adding channels", said Tony Wible, an analyst with Janney Capital Markets who follows Walt Disney (DIS), Viacom (VIAB) and Time Warner (TWX)
Amy Yong, an analyst with Macquarie Securities who follows Scripps, agrees. She said in an email that "media companies who want scale are thinking about diversifying their revenue streams, i.e. cable networks combining with broadcast or studios "
She rates Scripps "neutral," and in a recent note said cable consolidation might prompt smaller networks to seek merger partners or stoke interest from foreign buyers.
Internet-based distributors like Dish's (DISH) Sling TV offer subscribers so-called "skinny packages" of smaller numbers of channels that prompt some pay-TV customers to drop their subscriptions. Such offerings are likely to make it more difficult for network owners to sell cable and satellite operators a "bundle" of channels, said Liberty Media (LMCA) chairman John Malone in his media company's annual meeting on June 2.
Typically, a company such as Disney will sell the carriage rights to a network such as ESPN to a pay-TV operator provided that they also take ABC Family and the Disney Channel, among others.