Private equity groups can breathe easier for now, but they’re not out of the regulatory woods.

A federal district court judge in Texas dismissed a Federal Trade Commission lawsuit against PE firm Welsh Carson Anderson & Stowe (WCAS) for its role in a merger of regional anesthesiology practices. The decision holds up the traditional legal cover that PE groups have from lawsuits involving their portfolio companies — though the practice of such “roll-up” mergers remains in regulator crosshairs.

Split Decision

The FTC’s lawsuit last September against an allegedly decade-long anticompetitive acquisition spree in Texas’s anesthesiology market named two defendants: US Anesthesia Partners (USAP), a portfolio company that went on an acquisition spree, as well as WCAS, the PE firm that formed USAP in 2012 and continues to hold a stake in it. Regulators argued that the two entities “executed a roll-up scheme, systematically buying up nearly every large anesthesia practice in Texas to create a single dominant provider with the power to demand higher prices.”

The lawsuit looked to challenge or set two new precedents in antitrust law. The case marked the first such time the FTC attempted to establish serial roll-ups — when firms buy and merge various small businesses into one company — as an anti-competitive business practice, a strategy highlighted for the first time by the agency’s new M&A guidelines released last year. But antitrust experts also quickly noted the lawsuit’s specific inclusion of WCAS as a defendant, which directly brought into question whether PE firms can or should be held liable for the actions of their portfolio companies.  

The latest ruling represented something of a split decision: 

• The judge ruled the case against USAP could move forward, saying it has “plausibly alleged acquisitions resulting in higher prices for consumers, along with a market allocation and price-setting scheme. It would be premature to dismiss these claims at this stage.” That’s a win for those who want to regulate roll-ups.
• But the judge dismissed the FTC’s case against WCAS — which pared back its stake in USAP to 23% from 50%, and controls just two of its 14 board seats — saying it couldn’t prove that WCAS controlled USAP, and that the FTC failed to prove “that receiving profits from an entity that may be violating antitrust laws is itself a violation of antitrust laws.”

The decision “opens the door to a lot [more antitrust lawsuits],” Matt Stoller, director of research at the American Economic Liberties Project, told The Daily Upside. “Roll-ups are a typical tactic in business at this point. [This lawsuit] could be very meaningful.”

Private Practice: But are PE firms entirely off the hook? Not exactly. Stoller pointed to a private class-action antitrust lawsuit brought by cheerleaders against alleged cheerleader-apparel monopolizers Varsity Brands and its PE owner Bain Capital as another example of PE firms being held liable for their portfolio company’s actions. On Tuesday, Varsity Brands and Bain Capital agreed to an $82 million settlement. 

The PlayStation 5 may be on its last life.

Japanese entertainment giant Sony said Tuesday that sales of its iconic console rose over the past fiscal year, but it lowered its guidance for how many of the devices it expects to sell over the next year. As this chapter in the console wars winds down, the next bout could be particularly brutal.

It’s All About the Consoles

The PS5 was released way back in the mists of 2020 alongside Microsoft’s Xbox Series X, but it wasn’t until last year that the console was something you could easily buy. A semiconductor chip shortage and broader pandemic-era supply-chain knots meant the early days of buying a PS5 involved setting yourself alerts and pouncing when one came through. Despite those snarls, the PS5 managed to outsell the Series X, gaming analyst Rhys Elliott from analysis firm MIDiA told The Daily Upside.

Now with demand for the console winding down, Sony and Microsoft are both gearing up for the next stage in the console wars, but this time it’s against a backdrop of widespread job cuts and dried-up funding in the gaming industry. They’re taking vastly disparate approaches:

• Elliott said Microsoft has repositioned itself in the past five years as a services platform rather than a console maker. “It has poured money into its cloud, PC, and services operations alongside its console offering,” he said. Microsoft is also making major moves into phone gaming, announcing this week that it’s launching its own mobile app store to compete with Apple and Google.
• Sony, on the other hand, is sticking to console gaming, Elliott said, adding that exclusive first-party games (i.e., games you can only play on a PlayStation) have a big part to play in its strategy moving forward.  “PlayStation’s console and its […] exclusive first-party content remains its bread and butter,” said Elliott.   

If It’s Any Consolation: Historically, Sony has maintained an edge over Xbox by producing high-quality first-party games. In its Tuesday results, Sony said it didn’t have any big franchise first-party games in its near future, but Elliott said that doesn’t mean Sony is abandoning that strategy. “There is huge first-party content cooking at PlayStation, so it will retain its unique value proposition of high-profile prestige franchise games,” he said, adding: “It will just take time, as making new AAA [high-end] games can take up to seven years at this point.”

Streaming is entering its ’90s phase: The Battle of the Bundles.

On Tuesday, Comcast announced it would soon launch a new bundle that would package together its streaming service Peacock with Netflix and Apple TV+ at a reduced price. The news comes just a week after Disney and Warner Bros. Discovery struck a similar alliance.

Channel Surfing

After years of siloed a la carte streaming services, Hollywood is falling back in love with the bundle, the model that made them all bank in the halcyon days of cable. The logic is pretty simple: “Amid an industry scramble to cut costs without sacrificing growth, the hope is that entertainment bundles will reduce subscriber churn and appeal to a broader audience base,” Jamie Lumley, sector analyst at Third Bridge, wrote in a LinkedIn post following last week’s news of the Disney+, Hulu, Max bundle.

Comcast’s bundle, dubbed the StreamSaver, is just the latest such attempt to employ the strategy. Still, there’s a big catch: 

• When announcing StreamSaver at the MoffettNathanson conference in New York on Tuesday, Comcast CEO Brian Roberts said it will “come at a vastly reduced price to anything in the market today.” Currently, subscribing to the cheapest tiers of each of the three services would cost $22.97 per month (though in July, Peacock will bump the price of its ad-supported tier to $7.99).
• The catch? The bundle will only be available to Comcast’s broadband and TV customers, harkening back to the other form of bundles that used to rule the day — offers from telecom firms that packaged together internet, phone lines, and cable TV.

Tube Time: Peacock could use the boost. Nielsen launched its Media Distributor Gauge on Tuesday, a tool that tracks TV audience engagement by company across broadcast, cable, and streaming. Disney topped the chart for April, claiming 11.5% of total TV time. And while Comcast’s NBCUniversal came in third, at nearly 9%, Peacock claimed just 1.3% of audience TV time. YouTube, which operates without spending on costly professional productions, sat in the runner-up spot at 10%. And this only accounts for time watched on actual televisions — not phones, iPads, or laptops. Even more alarming for legacy media: For the first time next year, ad spending in the retail media sector is expected to surpass long-in-decline TV ad spending, including streaming, according to GroupM. If you ever wondered whether it was an asteroid or an ice age that killed the dinosaurs, we humbly suggest that it may have been both.