Ari Emanuel Says Endeavor Sitting Pretty In Era Of AVOD, Surging Sports Rights, Podcast Deals & Live Events; Sees No Hit From Shift In Content Spend
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UPDATED with comments from post-earnings conference call: Endeavor CEO Ari Emanuel said today that if there is a dip in content spending underway, his company “isn’t feeling it.” Responding to the question he gets from Wall Street every quarter now, he ticked off all the high-end deals Endeavor’s made across the entertainment spectrum.
“Endeavor is a proxy for content growth and a barometer for overall content, he said — from renewing House of the Dragon co-creator and showrunner Ryan Condal’s overall deal with HBO, to a podcast by sportscaster Stephen A. Smith (Known Mercy With Stephen A. Smith) to Keanu Reeves first television role (Devil in the White City for Hulu). “And it is going up across the board. We are not feeling any decrease in spending.”
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Movies, television, sports rights “are the only way to keep people engaged,” Emanuel said on a call after reporting third-quarter financials. And now big players are moving to AVOD “where they have to add more content. Netflix will have to go into sports and live.”
Yes, the big entertainment players have all tried to appease the Street promising a sharp new eye on content costs and profitability. “I understand what they have to say. But we are seeing no decrease in our representation segment… and don’t see that happening at any point.”
On AVOD — with a new services from Netflix and one upcoming at Disney, he antcipates contract renegotiations but “we are not there yet.”
“I’d suspect that at every turn of a new content platform there may be negotiations for new revenue models. I don’t know what those formulas are. But most [contracts] have the rights for SVOD, so they will have to come back if they want to have AVOD.”
Netflix, which had long shied away from both live and sports, bid recently for Formula One, losing out to ESPN, and is looking at other leagues, deals and events. Emanuel sees it experimenting overseas first before moving into the domestic arena. The streamer just announced its first live comedy show with Chris Rock.
With Apple, Amazon, YouTube, Paramount Global, Warner Bros. Discovery, Comcast, Fox and others, the competition for sports rights is “only going up. I do not see it going down, even in this environment,” the Endeavor chief said.
Endeavor shares jumped almost 6% after earnings after gaining nearly 5% during the session, outpacing the market.
The company saw a surprise loss last quarter on minority investments, not its core businesses, along with tough comps from the year-earlier period that included the results of Endeavor Content, a business that was mostly sold off in January.
Owned sports properties led by UFC saw strong growth, as did talent representation. The division called Events, Experiences & Rights was slower, impacted by the timing of events and some tough comps from last year.
Starting in January, Endeavor will add a fourth division called Sports Data & Technology comprised of OpenBet and IMG Arena.
PREVIOUSLY: Endeavor swung to the red last quarter with a $12.5-million loss stemming not from its core businesses but a minority investment in struggling college sports marketing film Learfield, and its remaining 20% interest in Endeavor Content.
Endeavor sold the bulk of Endeavor Content back in January to Korea’s CJ ENM, keeping 20% of scripted business, the non-scripted portion and some documentary and film sales and financing consulting services.
The company run by CEO Ari Emanuel posted a $63 million profit in the year-earlier quarter.
Learfield IMG College is a big collegiate sports marketing film with Endeavor and Silver Lake among its investors.
The total impairments, for $84.5 million net of tax, included write-downs, and resulted in an EPS loss of 4 cents a share vs a positive 16 cents the year before.
Endeavor’s revenue eased to $1.22 million from $1.39 million but in line with forecasts.
The company’s Owned Sports Properties division, led by UFC, saw revenue jump 39% to $402 million driven by higher media rights fees and live event, partnership, consumer product and licensing revenues, as well as an additional pay-per-view event and more events with live audiences. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) grew 45% to $196 million.
Events, Experiences & Rights saw flattish sales at $440.6 million (down 1%) on some media rights deals for events that don’t occur annually including the Ryder Cup, the UEFA Euro Championship and the CONCACAF World Cup qualifying games, plus the timing of events some of which were earlier in 2022 than the prior year. It cited growth from Wimbledon, Frieze Seoul, the Aer Lingus Classic and music events. Adjusted EBITDA was $49.7 million, down 42% on timing of events, insurance payments the year before and higher personnel costs.
Representation revenue of $388 million for the quarter was down 42% but largely because last year’s number included $334 million in sales from Endeavor Content. Excluding that, revenue rose 17%. The company noted strong demand for talent, including the ongoing recovery of music and comedy touring, and increased corporate brand spending.
EBITDA of $133 million was down 6%. The prior year included $26.5 million from Endeavor Content.
“Our business performed well in the quarter despite a turbulent macroeconomic environment,” said Emanuel. “Given our unique positioning relative to a set of highly resilient secular industry trends across premium sports and entertainment content and live events, we remain confident in our ability to continue delivering on our long-term growth strategy while also being good stewards of capital.”
The company said total debt stood at $5.427 billion at the end of Sept., down from $5.684 billion at June 30. It paid down $250 million last quarter and plans to do the same in the current fourth quarter.
Cash and cash equivalents totaled $970.8 million in Sept. and $1.8 billion in June.
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