This article is part of Bain's 2025 M&A Report.

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The creative industries have long stretched their tentacles into new places with the support of technology—for instance, art incorporated photography, music got recorded, and actors moved from stage to screen. Over the past 15 years, however, tech has stretched its own tentacles into media—for instance, Netflix’s massive digital distributor grew a studio to supplement its library, and Amazon’s retail hub grew video content as a sweetener.

Big tech’s push into media and gaming has led traditional media companies to react in distinctly different stages. First, they turned to M&A to consolidate and build scale within their core business. It was a way for media companies to compete with their tech brethren. Now, they are adding another approach—they’re using scope deals to expand across sectors. It’s to the point at which more than half of all media industry M&A involves either a target or acquirer outside of the industry (see Figures 1 and 2).

Figure 1

Figure 2A

Figure 2B

These companies are essentially themselves converging to compete with the tech media platforms; they’re also acquiring to gain more evergreen IP that can be used across modalities. By owning these cross-sector assets and IP, they create fan communities and multimodal content—and they generate revenue not just from subscriptions, streaming ads, or theater tickets but also through other means, such as merchandise and special events.

Disney, a media company with a rich history of expanding through both scale and scope deals, has also shifted more energy from scale to scope in recent years. While not a linear path, Disney moved from a majority of scale deals, such as Pixar in 2006 and 21st Century Fox in 2019, to an increasing emphasis on scope deals.  In 2024, the iconic company added deals outside its core to its M&A strategy by investing in Epic Games, maker of the successful immersive game Fortnite.

Another recent cross-sector deal involved Sony Pictures Entertainment’s purchase of Alamo Drafthouse, a theater chain known for serving dinner and drinks during films. Alamo will be managed under a new division called Sony Pictures Experiences, expanding Sony's presence into new parts of the media value chain.

And now let’s talk about content. Over the decades, content has remained king. Consumers might be fragmenting across platforms, but quality IP that can thrive in the proliferation of places to find it remains the constant in this world of converging platforms. That’s why companies are doing deals for evergreen IP that can be leveraged across new modalities.

Examples of IP-based acquisitions abound across sectors. Sony Music bought half of Michael Jackson’s publishing and recorded music catalog, banking on the enduring nature of his music in a digital future. Avatar-concert producer Pophouse Entertainment bought Kiss’s catalog as well as band members’ likenesses, banking not only on positive growth trends around their catalog of music and cross-platform viability but also a future of virtual live entertainment. Private equity funds have invested in smaller production studios with a track record of quality IP. For example, Redbird bought All3Media, seeking an enduring advantage in the video space.

What does this mean for media and entertainment companies shaping their M&A strategy? First, as our tech giant friends grow, convergence will continue to grow along with them. For example, as advertisers seek new revenue streams in a more fragmented consumption market, more media and entertainment companies will consider cross-sector deals to gain access to retail media subsectors. At the same time, the value of IP that can bring users to a platform will continue to hold and grow. That means more deals for IP, too.

Acquirers in cross-sector media M&A quickly learn that such deals require a different type of diligence. For one thing, an acquirer is likely to be less familiar with the target’s industry. Also, the revenue synergies inherent in scope deals are harder to realize and underwrite than cost synergies. To overcome both challenges, the most successful media acquirers will conduct more detailed diligence than usual, making use of data clean rooms and talking to the target’s customers to gain more confidence in the revenue benefits that they can derive from cross-selling, reducing churn, and increasing fan engagement on the platform.

Another big factor in effectively evaluating and delivering value from cross-sector media deals involves culture. The best acquirers will recognize that there is a higher risk of cultural differences, including differences in ways of working. They will find the balance of harmonizing these nonnegotiable cultural differences while also ensuring that they preserve the unique and valuable cultural assets from different companies.

Finally, successfully delivering on a convergence strategy means acknowledging the need for more cross-functional work in the combined company. That’s why the best media acquirers create an operating model that incorporates the right forums or mechanisms to encourage and ensure cross-functional work.

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Overview

• Looking Ahead to 2025: Preparing for What Comes Next

• Looking Back at M&A in 2024: Dealmakers Adapt as the Market Idles

• Generative AI in M&A: You’re Not Behind—Yet

• Where the Deals Are: 2024’s Top M&A Markets

• Ten Takeaways from Our M&A Executive Survey

Industry Views

• Aerospace & Defense M&A

• Automotive & Mobility M&A

• Building Products & Technology M&A

• Consumer Products M&A

• Energy & Natural Resources M&A

• Financial Services M&A

• Healthcare & Life Sciences M&A

• Machinery & Equipment M&A

• Media & Entertainment M&A

• Retail M&A

• Technology M&A

• Telecommunications M&A