Why Brad Pitt’s Plan B Is Looking for Buyers – and Who Will Ultimately Snatch It Up | PRO Insight
Reese Witherspoon sold her Hello Sunshine production studio last year to Kevin Mayer’s private equity-backed media firm Candle Media for a cool $900 million (Mayer just took center stage at TheWrap’s annual TheGrill event last week). And now it looks like Brad Pitt wants to join Reese’s party and toast her at the M&A cocktail bar.
As reported last week, Plan B has engaged investment bank Moelis & Co. to shop Pitt’s company to potential rabid buyers in yet another sign that the media and entertainment M&A market is heating up. (Read my article from last week where I dive deep into Hollywood’s inevitable mega-M&A with Big Tech.)
But Plan B and Hello Sunshine-style M&A — opportunities to acquire prestige production companies — aren’t driven by today’s brutal “down market” economic forces and low valuations. Rather, the price tags for a piece of Pitt, Witherspoon and others of that prestige ilk are driven by scarcity and the streaming video market’s insatiable need for compelling, differentiated (and hopefully game-changing) content. And that means that Plan B — the company behind Oscar winners “12 Years a Slave” and “Moonlight,” among many other esteemed titles — undoubtedly will fetch top dollar, rather than the kind of distressed selling that potentially awaits some major publicly traded media companies battered by Wall Street (which was the focus of my column last week for TheWrap).
We consumers voraciously consume content. If nothing else, we have demonstrated that in both good times and in bad we take comfort — and eek out our thrills — by sitting on our couches with remote in hand. But we now have seemingly endless choices to meet our “we want it now!” streaming needs. For that reason, it’s been a hyper-competitive streaming market for quite some time. As if that weren’t enough, now things are even more challenged for all major contenders. Let’s face it, all of our pocketbooks (even Brad’s… OK, maybe not Brad’s) continue to be squeezed by turbulent economic times. And that means we must make budgeting choices. Do we really need three or four streaming services, especially when most streamers continue to raise their monthly subscription fees?
Increasingly, the answer is “no” which, of course, puts even more pressure on all streamers in this existential clash of the video titans. This reality causes all of them, even seemingly invincible Apple, to now countenance something that was previously unthinkable — i.e., the dreaded “A” word (“AVOD,” that is, advertising video on demand). And content, content, content — exclusive “Must See TV” content — essentially remains the sole differentiating strategy for customer acquisition and retention for all streaming flavors, SVOD and AVOD. No one has cracked any other code yet.
And that brings us back to Pitt’s “Plan A” — his new M&A Plan B. Pitt and Plan B are prestige names that all major streamers understand and covet. Most of them likely believe that Plan B will continue to produce highly marketable marquee content that draws consumers in — and then keeps them there. To flip the script on that old adage in financial investing, buyers hope that Plan B’s past performance does guarantee future success.
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To be clear, a deal to buy Pitt’s Plan B goes well beyond earlier exclusive, but limited term, streaming-driven mega-producer deals like Netflix’s latest $150 million five year extension with Shonda Rhimes and earlier $300 million deal with Ryan Murphy. A buyout of Plan B is an acquisition of the company itself, including its intellectual property (content), and not just the personality (Pitt). It’s a marriage that hopefully lasts a lifetime, not just a multi-year tryst.
In my mega media M&A article last week, I predicted other “A list” boutique production companies that are ripe for the picking for the same reasons. And, just like Witherspoon’s Hello Sunshine (and also as a virtual certainty for Pitt’s Plan B), none of these will go cheap. Prestige studio/distributor A24 falls into this hallowed category of A-list targets. Private equity firms Stripes and Eldridge own a significant chunk, and private equity’s ultimate goal is to sell at massively inflated prices typically within about five years. That will happen here.
Anonymous Content is another likely target. It’s a bit more complex here, because Laurene Powell Jobs’ Emerson Collective owns a significant stake, and she certainly is in no need to sell. But make no mistake, Emerson Collective is a “for profit” company that also exists to achieve powerful financial results. Prices certainly won’t be low here either. But content is more king than ever, and that reality will only deepen over time. That means that today’s “overspending” may be tomorrow’s content bargains. Remember Disney’s $4 billion mega-buy of Marvel Entertainment back in 2009? That don’t look so bad right now, does it?
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And just in time for Halloween — and in this “tricky” environment in which content franchises are the new oil — Blumhouse is an obvious “treat.” Blumhouse is a rare entertainment brand that screams quality to its coveted young audience, and it boasts multiple horror franchises that can be (and have been) cost-effectively re-imagined time and time again (to great success and high returns time and time again). Horror sells, so Blumhouse is an obvious market buy. That is, unless Comcast NBCUniversal buys it outright since it’s already engaged in an exclusive first-look deal. The conglomerate is the most obvious buyer if (and this is a big “if”) it holds onto its NBCUniversal media business. That’s not a sure bet, since Comcast’s sexy media business drives significantly lower margins than its lucrative, ever-growing and very unsexy broadband business. Why? Because content is expensive of course. Peacock rival Netflix (well, is Peacock really a rival?) spends roughly $17 billion for content annually.
That brings us back to the central role played by content. Expensive content. So who are the likely buyers for Pitt’s Plan B? With their trillion dollar plus valuations, any one of the mega “Big Tech” streamers could make this move without even blinking (although the antitrust police likely will have their own “say”). And some ultimately may go shopping, just like Amazon did for storied boutique franchise-laden studio MGM.
But my bet for Plan B is that it will end up with a similar fate to Witherspoon’s Hello Sunshine. Private equity. Even now in this massively down market, private equity is flush with cash. And private equity’s mission is to spend, not hold onto it. That’s great news for Pitt and all the other marquee production companies and boutique studios, since Candle Media certainly isn’t the only game in town. Multiple buyers will go door to door trick-or-treating for all of them. It’s the irresistible candy they seek. And all of that demand means lofty numbers are to be expected. There’s only one Brad Pitt after all.
For those of you interested in learning more, visit Peter’s firm Creative Media at creativemedia.biz and follow him on Twitter @pcsathy.
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