Danger Ahead: Celebrity Production Companies and Private Equity
What EOne's discount sale to Lionsgate warns about the inflated talent-driven bubble
Listen, I know that when it comes to entertainment news for the last few months, the story was, rightfully, the dual strikes. Unfortunately, that meant that sometimes we missed some other big stories out there in the world.
Like this one:
Sounds like a lot, right? But, uh, no. Hasbro bought Entertainment One for $3.8 billion in 2019. Yes, Hasbro chose (wisely) not to include Peppa Pig in the deal with Lionsgate (since that character sell tons of toys!), so some of the decline from 2019 to 2023 is due to that. But certainly not all of it.
Entertainment One was an independent producer with hundreds of titles to its name and it even now has multiple TV shows in production. Lionsgate bragged that EOne would add 6,500 titles (including films and TV episodes in “titles”) to its library.
Also, earlier this year, BRON, a Canadian production company filed for bankruptcy protection. It too had worked on, co-produced or financed hundreds of productions over the year (it had credits on a few titles like The Joker, Candyman, House of Gucci and Ghostbusters: Afterlife.
And yet… based on news reports, both of these companies are worth much, much less than Reese Witherspoon’s Hello Sunshine or LeBron James’ The SpringHill Company today?
That’s right. Among the many upside-down calculations during the Streaming Wars era (R.I.P.) was the belief there would be infinite need to produce content for infinite services. Layer on that deference to celebrity, and we saw a gold rush for production companies from bold-faced names from private equity. As I noted last year (with skepticism), LeBron James became a billionaire mainly based off the valuation of SpringHill Company; Reese Witherspoon’s Hello Sunshine was valued at nearly $1 billion in 2021 (seriously, twice the value of EOne today!). Tom Brady’s Religion of Sports raised $50 million, Brad Pitt’s Plan B sold a majority stake to French conglomerate Mediawan for “several hundred” million dollars, and Matt Damon and Ben Affleck launched a brand new artist-centered production company, with an investment from RedBird Capital Partners of $100 million. And Peyton Manning and his Omaha Productions got an investment in May, valuing his company at $400 million from Peter Chenin’s North Road.
And of course, Netflix being Netflix, it paid Prince Harry and Meghan Markle a reported $100 million over five years. The Obamas had a similar payday.
Since no one loves to burst bubbles more than I do, today we’re going to look at those gold rush investments and how they panned out. Even without the EOne comp to put them in context, it’s hard to squint and see any value trajectory. Particularly with the long-term contraction in production I expect to come. If that happens, some of these deals sure look like bad investments.
In this article, you’ll learn:
Using viewership data, whether celebrities actually moved the needle on creating hit shows. (Hint: 😬)
Who had more misses than hits.
A comparison of volume in production company libraries and cost per show to private equity.
Why I worry that entertainment studios will still end up bailing out the private equity groups who jumped in with investments.
And what will private equity do with these companies in the end?