Expect continued media consolidation, because scale matters, 21st Century Fox vice chair says

  • Media consolidation will continue as companies compete for unique franchises and greater scale, 21st Century Fox Vice Chair Chase Carey says.
  • As the sheer scale of spending by technology giants changes the nature of the media game, Carey says, mergers and acquisitions activity will likely continue.

Media consolidation will continue as companies compete for unique franchises and greater scale, 21st Century Fox Vice Chair Chase Carey told CNBC on Tuesday.

"To be successful, you either need scale that enables you to compete with the world you are heading into or really unique franchises that enable you to distinguish and build value off those unique strengths," Carey said in an interview with CNBC's Julia Boorstin.

Carey's comments come on the heels of Comcast's $40 billion takeover of Sky Media, which is just the latest in a torrent of mergers and acquisitions across the media sector. Comcast successfully outbid 21st Century Fox for the Sky assets in an auction that pitted two of the largest U.S. media companies against one another. Carey painted 21st Century Fox as a winner in the transaction.

"For Fox, first, we had gone into that initial transaction owning 40 percent, we said we should own and control, or monetize. To be a minority stake[holder], even a large minority stake[holder], was not a long-term place to be, so Fox acted on that," he said.

Europe's largest pay-TV operator, Sky has 22 million customers, produces almost £2 billion in annual profits and has scope for significant growth. Sky has also been successful in launching on-demand services, such as Now TV, that make it more competitive against rivals such as Netflix.

Comcast's Sky acquisition, Carey said, was more of a play for a unique franchise than a play for scale, which is one component of staying relevant in an increasingly competitive media landscape.

"In a world of unique franchises, Sky is an incredibly unique franchise," Carey said. "As it had a brighter light shined on it — competition drives everything — there was competition for a unique, scarce asset. And that's going to always affect values."

Scale is the other approach traditional media companies are taking to compete against tech behemoths. It's been a huge year for media mergers and acquisitions. Earlier this year, despite antitrust concerns from the Department of Justice, AT&T won approval for its $85 billion takeover deal for Time Warner, opening the door for more media M&A activity. Disney and Comcast have gone toe-to-toe, bidding for 21st Century Fox assets, as competition from technology companies has driven large media companies to own both the content and the distribution platform.

"I think we will continue to see an active [mergers and acquisitions] market across the sector," Morgan Stanley's Ben Swinburne said on CNBC's "Closing Bell." "A lot of the formerly very large media companies have become relatively small players. As you have seen with the likes of Amazon and Netflix and others, you have these huge, well-capitalized, global studio platforms ... and so that is causing a lot of anxiety in the sector, and you'll see continued consolidation."

Furthermore, Netflix's size is still "underappreciated in the marketplace," Swinburne added.

"If you think about Netflix's model, the ability to spend ... $10 million an episode on a season of 'The Crown' and amortize that across 100 million-plus subscribers globally is a huge scale advantage," he said.

As the sheer scale of spending by technology giants changes the nature of the media game, Carey said, mergers and acquisitions activity will likely continue.

"When you look at the resources that exist with the players like Google and Netflix and Amazon, clearly they are deploying enormous resources and spending billions of dollars, if not double-digit billions .. so the nature of this game is competing," he said.

"I think there will be winners and losers, from a content perspective ... unique event content will be a winner. I think a lot of content will get commoditized, and I think all of that is going to drive change," he added.

Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.