What's going on?

You�ve heard of The Hunger Games and you might have heard of the studio behind the hit movies: Lions Gate Entertainment. On Thursday, Lions Gate announced that it has agreed to buy American media company Starz in a deal worth about $4.5 billion.

What does this mean?

Lions Gate, predominantly, makes movies and TV shows (it also made Mad Men, for example). Starz owns a suite of cable TV channels (e.g. channel 335 on your DirectTV or Sky subscription). It also creates its own content (like the hit series Outlander� yeah, we haven�t heard of it either

Why should I care?

For the stocks: This is a �cash and shares� deal. That means that Starz�s shareholders will get some cash but also shares in Lions Gate. So, while Starz�s investors are �cashing-out� to some extent, their future returns are still dependent on the success of the combined company. For example, Lions Gate could benefit from the future involvement of one of Starz�s big shareholders, media mogul John Malone.

The bigger picture: It�s all about scale � and not just in media. A streaming subscription is far cheaper for customers than cable TV is. That means producers and distributors of content make less profit per user than they used to before the age of streaming. A solution to that is to spread the costs (e.g. the cost of producing the TV show) across more viewers. In a nutshell, that�s how better technology (e.g. streaming) is leading to lower costs for consumers which, in turn, forces companies to achieve bigger scale if they want to remain profitable. And that�s increasingly taking place across many industries (think: Google and Facebook for advertising, Amazon for retail).