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Raine Group companions Jason Schretter and Erik Hodge
Courtesy of Raine Group
The Raine Group is a dealmaker that Hollywood of us come throughout commonly. As an investor, the service provider financial institution, launched in 2009 by former Goldman Sachs banker Joe Ravitch and UBS banker Jeff Sine, owns stakes in such media, leisure and related-sector powerhouses as Rob Howard and Brian Grazer’s Imagine, Spanish-language media titan TelevisaUnivision, TV manufacturing firm Propagate, music streaming service SoundCloud and sports activities betting firm DraftKings.
In the meantime, the record of purchasers of its advisory enterprise, starting from mergers and acquisitions, divestitures and personal capital elevating to strategic recommendation, reads like a who’s who. Through the years, they’ve included the likes of Common Photos, when it struck a slate co-financing take care of China’s Perfect World Pictures; Endeavor, together with on its $775 million sale of an 80 % stake in Endeavor Content material to South Korean big CJ ENM; WWE, for instance on its merger with Endeavor’s UFC; CJ ENM on its funding in SkyDance Media; and the Roald Dahl Story Co. on its sale to Netflix.
With excessive inflation and different macroeconomic clouds affecting the TV promoting market, Hollywood giants chopping prices as they give the impression of being to push their streaming companies nearer to profitability, and lots of shares underneath stress amid investor skepticism, dealmaking within the media and leisure house has been challenged. However many on Wall Road predict additional consolidation forward.
On this context, The Hollywood Reporter spoke to Raine companions Erik Hodge, who leads the corporate’s L.A. workplace and its efforts within the leisure and content material house, and Jason Schretter, Raine’s London-based head of Europe, Center East and Africa. They shared their insights and takes on the present deal atmosphere, the agency’s growth in Silicon Valley and in international markets, what’s subsequent for Hollywood M&A, and their tackle the alternatives for Raine’s portfolio corporations.
Within the media and leisure industries, there was a deal increase, which appears to have slowed down. Do you’ve got any big-picture ideas on the place we stand and whether or not the sector’s deal increase has come to an finish, as some argue?
Hodge: There are challenges, however there have all the time been challenges, and there are alternatives. Relying on folks’s expectations, there are nonetheless alternatives for offers to get carried out, particularly in leisure. You do have all of the macro challenges, whether or not it’s rates of interest and the advert market right down to the way in which the world has modified its views on streaming, and now a writers strike. However on the finish of the day, nice content material creators discover a option to reduce by way of. And that extends to the deal atmosphere.
Schretter: Out of London, I do all of the sectors. I companion with Erik on leisure stuff, after which sports activities and music stuff. So it goes throughout. I might say it’s sector-specific. Simply taking sports activities, we haven’t seen a slowdown in any respect. In actual fact, there was an acceleration of exercise. Music is an analogous dynamic the place individuals are simply keen to enter it. I feel the sooner, extra growth-focused, the issues that it’s essential see develop earlier than they discover full traction, that stuff has been slower. However with spectacular administration groups doing the correct factor, there may be nonetheless a market. It’s simply that individuals are somewhat bit extra picky.
Jason, you talked about sports activities. Amongst others, Raine ran the public sale of English Premier League membership Chelsea FC that led to final 12 months’s sale to a gaggle led by Todd Boehly [a part-owner of THR], Clearlake Capital, and others. And the corporate not too long ago suggested sports activities leisure powerhouse WWE on its merger with Endeavor’s UFC. Why is sports activities such a sizzling sector?
Schretter: We’ve been on a run with Chelsea and now Manchester United, Inter [Milan], and Olympic Lyonnais. It’s been an thrilling time, and I feel it’s pushed by two issues. Primary is COVID put a highlight on the truth that [sports] is the one factor that folks want of their lives. It’s actually embedded, it’s one thing that folks rushed again to as soon as they had been capable of, and it in all probability acquired them by way of powerful instances throughout that interval. In good instances and dangerous instances, sports activities appears to be the one factor that continues to do properly.
The opposite factor is, I feel there may be nonetheless a rising maturity and professionalism of sports activities that’s persevering with to develop. That’s pushed by group homeowners and league homeowners and everybody actually saying that a few of these issues may be carried out higher. From the U.S. perspective, whenever you have a look at what among the prime leagues have carried out, whether or not or not it’s the NFL or the NBA: world effort, actual advertising and marketing, straight understanding clients — these are the issues that different leagues and groups try to duplicate. And for entrepreneurs accustomed to these sectors, whether or not or not it’s from a media angle or a sports activities angle, or no matter angle, they see alternatives to successfully take these and switch them into greater than only a group. It’s a social community, it’s a commerce platform, it’s loads of issues all underneath this envelope of a sports activities group or league.
You could have additionally talked about music as a continued space of deal exercise. Any ideas on what’s driving that, and are there any latest Raine music offers you want to spotlight?
Schretter: The continued progress of streaming and the rise of the unbiased artist creates new funding alternatives in content material and platforms throughout the music {industry}. Prior to now 12 months alone, we’ve been concerned in a number of industry-leading transactions, together with the sale of [hip-hop label] High quality Management to [South Korean music giant] Hybe, the inspiration of [former Apple Music top executive] Larry Jackson’s music platform Gamma and [private equity firm] Francisco Companions’ acquisition of Kobalt Music Publishing.
Erik has talked in regards to the rise of streaming. Jason has talked about the COVID pandemic. Do you consider that “content material is king” continues to be one key mantra within the {industry}? And are there any basic mantras or issues which have modified amid all of the upheaval of latest years?
Hodge: I’ve by no means actually considered it as a monarchy. In some situations, the content material is, in some situations, the viewers is, in some situations, the distribution platform is [king]. It’s sort of totally different for several types of content material and totally different conditions within the ecosystem. All that being mentioned, nice, nice, nice content material, and that’s a small share, will all the time have huge quantities of worth — sports activities IP, the true, true, true franchises. However I’ve all the time been reluctant to crown one or the opposite the king. I feel it’s an ecosystem, and there’s relative worth that shifts round relying on the scenario.
Are there any rising areas, say AI or the metaverse, that you simply guys and Raine general have been spending extra time on? And the way huge a deal are they?
Hodge: I might consider AI as a possible enabling instrument at this level which may simply assist in both the artistic course of or the content material discovery course of. I don’t assume it’s a substitute. I feel it’s a instrument. After which I consider issues like NFTs, the metaverse as simply extra avenues of both monetization or engagement. I’ve all the time been reluctant to think about both AI or Web3 because it pertains to leisure as ends in themselves.
If you have a look at metaverses typically, I’ve all the time held the view that folks wish to dwell with nice IP in some type or vogue and interact with past the film, past the tv present, past similar to that preliminary second. And something that provides them a chance to do that may be actually attention-grabbing and may be closely monetizable. In order that’s how I have a look at Web3.
On the AI aspect, it’s all about effectivity, whether or not it’s serving to a author, I do know that’s a sizzling subject, ideate, create a greater screenplay in a extra frictionless atmosphere, or serving to a advice engine match demand and provide of content material — these are at this level instruments that I feel may in the end make the ecosystem extra environment friendly.
Schretter: Yeah, I simply wish to double-click on one factor. AI and metaverse aren’t the factor, it’s a method to a factor. So it’s essential have some form of substance to what you are promoting mannequin, and which may be enabled, amplified, accelerated by AI or the metaverse as a method. However once we see alternatives all through our enterprise which can be fronting AI because the occasion, these are issues we are inclined to steer clear of, as a result of I don’t assume we actually have an amazing sense of whether or not that as a stand-alone has lasting energy. However we now have seen some superb companies which can be utilizing these instruments to drive their initiatives, which is thrilling.
Raine has lengthy had a world focus. Are there any areas of the world the place you see explicit or rising alternatives for Raine?
Schretter: When you have a look at our web site sufficient, you will notice the way it goes from level to level, and also you’ll see extra dots forming on the worldwide map. We’ve got been very pragmatic about these, however are actually making an attempt to go after what we see as markets with large alternative, the most recent two being Paris — we consider there’s much more give attention to continental Europe and wish to actually ensure that we now have a presence on the bottom that we will act upon — and Singapore, a market that we most not too long ago launched and that we’re very enthusiastic about. We see issues in these markets that we perceive from being in additional mature markets however are actually on the fringe of turning into one thing particular. So we now have made an effort, however I don’t assume we’re essentially carried out there.
Erik and I simply spent every week within the Center East, and we had double-digit conferences over the course of every week. We’re more and more enthusiastic about these being markets that aren’t simply sources of capital, however even have the potential to be creating and creating corporations and content material and leisure and issues which can be going to be helpful for our ecosystem. The hope, from our perspective, is that that does bleed down into Africa as properly. We’ve got seen early steps of that. Frankly, for the scale of which we are inclined to become involved, it could nonetheless be somewhat bit early, however not for lengthy. We’re going to be spending much more time there over the course of the subsequent, let’s name it, 12 to 18 months.
I keep in mind, Erik, you labored on a Common slate financing take care of a Chinese language firm a couple of years in the past. Does China nonetheless current alternatives?
Hodge: I might say China has been much less of a spotlight for us, simply given the political local weather and the power to really do offers there. Bilateral U.S.-China offers, Hollywood-China offers, they’re simply not occurring proper now. China continues to be an enormous market with an unlimited quantity of customers and there are some unbelievable corporations there. That was a part of the considering behind increasing Raine into Singapore, as a result of that could be a place the place China is interacting with different Asian corporations. We nonetheless need publicity to China. It’s simply that the times of Hollywood, China and the direct relationship have actually modified.
There are different areas, like Korea, the place the market is extraordinarily thrilling. Take a look at offers like Endeavor Content material and CJ ENM, which we had been instrumental in, Wattpad and [South Korean internet conglomerate] Naver, which we had been instrumental in. These are examples of simply the dialogue that’s occurring between Korea and Hollywood. It’s a really thrilling place to be doing enterprise.
Raine’s portfolio corporations embody Think about Leisure, TelevisaUnivision, Propagate, SoundCloud and DraftKings, amongst others. I wished to ask you about a few them. What’s your tackle the place Think about stands and what’s subsequent for it? There appears to be recurring chatter a couple of doable change in possession or investments or fundraising …
Hodge: Think about is likely one of the greatest manufacturers on the earth of content material creation, and so they all the time get loads of calls — generally they have interaction, generally they don’t. A few of that noise has been round for the final a number of years. I’m extra optimistic in regards to the enterprise than I’ve ever been, simply given the platform that they’ve constructed. Once we invested [in 2016], it was very targeted on broadcast tv and theatrical movie by way of offers at Common and Fox. At this time, they’ve a really, very, very broad content material providing that extends to documentaries, lower-budget content material by way of our acquisition of Jax [Media], high-end documentaries by way of our acquisition of [Alex Gibney’s] Jigsaw [Productions]. We’ve got elevated the management by including folks like Steve Shikiya [as chief operating officer] and Justin Wilkes [who was promoted to president of Imagine early this year from his previous roles as chief strategy officer of Imagine and president of Imagine Documentaries and Brands]. And that core engine of nice high-end premium IP that Brian [Grazer] and Ron [Howard] have pushed over the past almost 40 years continues to be in place. So I’m very excited in regards to the prospects for the corporate. How that interprets into offers is sort of a secondary consideration.
How about TelevisaUnivision and its upside?
Schretter: Once we made that funding, we invested on a pattern that we had actually targeted on eternally, which is that this progress of the facility of the Spanish-language-focused shopper inside North America. The merger of the U.S. and Mexico [businesses] by way of TelevisaUnivision was one thing that, once we first began Raine as an organization, wouldn’t have been thought doable. Due to TelevisaUnivision [CEO] Wade [Davis] and the management there, they’ve carried out a tremendous job bringing these corporations collectively. This can be a phase of the market that isn’t totally served by the massive streamers. So TelevisaUnivision uniquely has the potential to go and serve this viewers with issues like streaming and different issues which were taken as a right. We’re simply actually excited. All the things appears to be entering into the correct route, and even with among the advert market ups and downs, the corporate continues to be performing properly, which is nice. I don’t assume each U.S. media firm can say that proper now.
Anything you want to emphasize?
Schretter: I might simply emphasize: The enterprise just isn’t in a shutdown, closed-for-business mode. We aren’t seeing that in any respect. We nonetheless see loads of alternatives, each for consumers, sellers and traders.
Hodge: The best way we work as a group is very, extremely, extremely differentiated. I feel Jason covers Europe on the highest stage of anybody who’s doing it on this house. I feel the identical about my colleagues who cowl Asia or India. And I feel we now have the most effective, if not one of the best, sports activities franchises, the most effective, if not one of the best, music franchises, and gaming and leisure.
Interview edited for size and readability.
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