In this segment from MarketFoolery, host Mac Greer is joined by analyst Aaron Bush to dig into the latest news in the media consolidation wars: a new offer from Twenty-First Century Fox (NASDAQ:FOXA) (NASDAQ:FOX) to buy the 61% of Sky PLC that it doesn't already own.

As Europe's No. 1 media company and pay-TV broadcaster, Sky's quite a prize as the various giants of content and distribution look to shore up their relevance in the Netflix (NASDAQ:NFLX) era, when true success apparently requires a vertically integrated empire with scale. Who is winning and losing in this M&A frenzy? And which companies are the most interesting buys in the media sector?

A full transcript follows the video.

This video was recorded on July 11, 2018.

Mac Greer: I want to begin with the latest wheeling and dealing in the world of media and entertainment. 21st Century Fox has agreed to by Britain's Sky TV in a deal valuing Sky at around $32.5 billion. Sky is paid television, for those who don't follow the company. That offer trumps a rival offer from Comcast. This all happens, Aaron, against this backdrop of Disney and Comcast battling it out over most of Fox's assets, as well. We have a lot of wheeling and dealing in media and entertainment. What do you think?

Aaron Bush: It's an absolute frenzy, that's for sure. Fox already owns 39% of Sky, so they're acquiring to bid the remaining 61% that they don't own right now. I think what's amazing out of all of this is, the bidding for Sky, for this particular deal, started back in 2016, and it keeps on being a back-and-forth between Fox and Comcast and regulators. Now, if you look at Sky today, it's trading at an 80% premium to when the bidding first started, which is crazy. What that tells me is that these big players trying to consolidate the space, they're kind of desperate to, a little bit.

Greer: We were talking about this before the taping, does this desperation come from Netflix? Netflix has had such an incredible run. Is this all in response to this fear of what Netflix is and could become?

Bush: I definitely think that's a piece of it. Essentially, this is a battle for who will own the content and distribution that will define the next decade. I think what Netflix proved is that scale is especially important. All of these large companies, even though they're large on their own, and they do other things besides just content and distribution, but they're realizing that to stay at peak relevance, to be meaningful to everyone, to own the customer relationship, have people pay lots of attention to them, they have to pay up a whole lot more than they would have expected even two years ago. But they're doing it, which is crazy, in my opinion.

Greer: Against that backdrop, who do you see as the biggest winners and the biggest losers with all this wheeling and dealing?

Bush: The biggest winners are whoever is getting acquired. Sky, for example, is an obvious winner. Right now, Sky's market cap is trading above what Fox is offering, which tells me that they're expecting Comcast to come back again. Really, these companies that are deemed to have valuable assets, those are the winners, at least for the short-term.

In my opinion -- this might be controversial -- the losers are whoever is buying them. The reason is because they're not prioritizing price, and they're just trying to stay relevant. Relevancy is important, but if you keep on raising the price, then you're raising the barrier for making these assets actually be worthwhile to you. It becomes harder and harder to justify price.

As all these companies keep on taking on debt, they keep on trying to force their balance sheets to make this work, looking for synergies and all that good stuff, it'll become harder and harder. I really view this as, whoever is getting acquired today is stealing the returns from the investors in these larger companies in the future.

Greer: That reminds me, on our recent trip to Philadelphia, we were part of a leadership development group here. We met with Jack Bogle, founder of Vanguard. He had this great quote. He said, "Trees don't grow to the sky."

Bush: They don't.

Greer: But it seems like Netflix has been growing to the sky.

Bush: Maybe Netflix is not a tree. Maybe it's a skyscraper or something, and everyone else is the tree. No, Netflix is playing a different game. I think this is especially important to understand. All of these companies, the Foxes and Disneys, they saw what Netflix achieved. All of these moves are their way of trying to match Netflix in some way.

I think that's important. The future is definitely digital delivery of huge bundles of content, owning the customer relationship, scale is important. But what I think they're doing is trying to raise who Netflix is today, when Netflix is playing at a whole nother level, and is trying to become what Netflix will be tomorrow, which is something completely different.

Greer: Let's wrap this up. Let me give you some names here and see if any of these names jump out at you. When you define this space broadly, when we're talking about media and entertainment, we're talking Netflix, of course, we're talking Disney, Netflix, Comcast, Amazon, Alphabet, Apple, we could go on -- any of those names jump out at you?

Bush: I think that Alphabet, Amazon and Netflix are still the most interesting. Alphabet owns YouTube. They're playing a completely different type of entertainment game. Amazon, kind of similar to Alphabet in the sense that they have Twitch. I think, if you look at people saying the best tech acquisitions of all time have been Instagram and YouTube, maybe, Twitch is the next one. I think Twitch is probably going to be worth $100 billion at some point for Amazon. Amazon will have that. They'll also have Prime, which is similar to Netflix.

I do think Netflix and Amazon will have a pretty striking future that a lot of people don't expect. I think Amazon recognizes that the future of them -- right now, they have 125 million subscribers. One day, that'll be 400 or 500 million. What can you do when you have half a billion subscribers? You can do a whole lot more. [laughs]

There will be diminishing returns to the spending that they have on normal content. Big sports rights will be up in the next decade. They're probably going to be able to pay up for that more than other players. The future of video games is streaming. And cloud infrastructure, who does that better than Netflix? I think Netflix, there's hidden optionality there. For these newer, internet-native entertainment companies, they have hidden optionality that these massive, old-school behemoths aren't picking up on yet.