Some of my thoughts on media & entertainment business … if you were forwarded this email and want to receive regular updates, click here:
Disney v Black Widow
I’m usually hesitant commenting on current Disney business (I work for Disney). However, this story is too interesting to not talk about.
Little over a week ago, news broke that Black Widow star, Scarlett Johansson, sued Disney for simultaneously releasing the film on Disney+ and in theaters. Johansson’s team believes she missed out on a lot of money due to the cannibalization from Premier Access.
Hollywood stars generally negotiate a backend % of box office revenues in addition to their salary. It’s how Robert Downey Jr. earned ~$400M over his tenure as Iron Man. But when studios (like Disney), are bolstering their streaming services with day and date release tentpole films, talent is definitely leaving some money on the table.
Iron Man Money No More: Although this case is isolated to Disney, the bigger theme impacting all of Hollywood is that studios are no longer financially aligned with talent. In the “olden days” (pre-2020), everyone wanted the same thing: a fat box office. Today, studios are primarily focused on subscriber numbers since that is driving the stock price.
To encourage more sign-ups, studios are dropping big films on their streaming services without the usual exclusive theatrical windows. Actors and actresses miss out on box office potential and more importantly, do not share in the upside of subscriber growth. If 100,000 people sign up for Disney+ to watch Black Widow, Johansson doesn’t get a cut of the $8/month * 100,000 revenue from new subs (assuming no churn). There are no precedent contracts yet for talent to be compensated for metrics like “last 30 days streamer uplift” or “multiple on number of first streams.”
Crystal Ball? It’s a very interesting and important time for Hollywood negotiations. There are millions of dollars of value at stake shifting between studios and talent. The contracts that shake out over the next 6 months will set the tone for a new era of compensation deals. Can stars hold on to the same negotiation power they did in the past? In our minds, Chris Hemsworth is Thor so how could you make another Avengers film without him. On the other hand, studios’ franchise IP will continue trucking along. Star Wars fans will always flock to the next movie regardless of who is cast in the next generation of stories. It’s a crucial moment of studio/talent tug-of-war. I’m looking forward to seeing where the dust settles…maybe sometime in Q2 2022?
Other Highlights
South Park
South Park signs $900M deal with ViacomCBS for 6 more seasons and 14 movies. Although HBOMax has the rights to South Park shows for now, you bet Paramount+ is getting first dibs on some of those movies
M&A
Hello Sunshine sold to unnamed media company formed by former Disney executives, Kevin Mayer and Tom Staggs, and financially backed by Blackstone. The deal values Hello Sunshine at $900M. A little more detail given the size of this deal:
No doubt, the $900M price tag is a premium. According to The Information, Hello Sunshine sold at ~7x current year revenue. For context, Disney is currently trading between 5.5-6x while Lionsgate and Fox are hovering ~2x. Furthermore, although not a perfect comparables set, the mean of revenue multiples for Digital Media transactions from 2015-2020 was ~3x
What are Mayer and Staggs paying for? An anchor name in Witherspoon to kick off more production company acquisitions (think SpringHill or Imagine Entertainment as potential targets) and celebritized monetization (all the potential revenue streams around Witherspoon including TV, podcasts, book club, and e-comm catered to a very niche consumer base)
The plan? Mayer and Staggs want to gobble up other content players and license those shows and films. With all the streaming studios walling off their own films and tv, it seems inevitable that 3rd parties are taking advantage of the content feeding frenzy. Also, given Blackstone’s involvement, this team must feel confident they can package these goods up in the next 4-7 years and exit at another juicy multiple
Penn National Gaming (investor in Barstool Sports) agreed to buy Score Media & Gaming for $2B
Walt’s Thoughts 🦧🍻
"Who are Mike Richards and Mayim Bialik?"
No seriously, who are Mike Richards and Mayim Bialik?
After an eight-month audition to fill quite possibly the largest shoes in television, Jeopardy! has announced that the late Alex Trebek's duties will be assumed by its own executive producer, Mike Richards, while The Big Bang Theory star, Mayim Bialik, will assist with primetime specials. Amidst a carousel of high profile guest hosts that ranged from Ken Jennings to Robin Roberts to Aaron Rodgers, the showrunners opted with the two names that surely warrant a Google search.
How could they possibly have passed on the undisputed Ken Jennings (total Jeopardy! screen time is second only to Trebek)? Or fan favorite, LeVar Burton? Who runs this show anyways?
Ah yes, it's Mike Richards.
Taking a page out of Dave Harken's book, Richards clearly realized that if you want to do something right, you've got to do it yourself. He also realized that $10 million to work 46 days per year isn't too bad either. Well played.
What I’m Streaming…
As a 90’s baby, I tried so hard to like this film. I didn’t mind the corny plot line, Lebron’s mediocre acting, or even the ridiculous pacing through Act 2. I was annoyed that this movie felt like a 2 hour commercial for Warner Bros littering the film with IP product placement.