Hollywood Fire Sale: Overheated Acquisition Costs for Content Companies

was Endeavor’s studio business, Endeavor Content. For about $1 billion, Korean media giant CJ ENM will have 80% control of the company.

First, the valuations being reported include earnouts, which is a contractional arrangement in which the seller can pocket additional compensation if the business meets certain financial goals. The reported figure of $900 million for Hello Sunshine and $3 billion for Moonbug is at the high end of the range.

Finally, most of the money being pumped into the content acquisitions is coming from private equity. It’s been a good couple years for private equity as the stock market flirts with record highs. They have the capital to spend millions, and even billions, to make big bets on media companies with highly desirable IP. And there’s a lot of money out there to be spent while not necessarily an abundance of content players out there to be bought. Hence, the big valuations we’re seeing in the market.

But the aggressive move to ramp up quantity in hopes of some hits is a strategy that has worked in the past. Case in point: Netflix. The streaming giant has seen great success with its strategy of prioritizing content quantity above all else, though it would probably argue that it delivers on the quality front as well.

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