1
00:00:00,080 --> 00:00:12,000
Speaker 1: M H. Welcome to Strictly Business Varieties, weekly podcasts featuring

2
00:00:12,080 --> 00:00:16,040
Speaker 1: conversations with industry leaders about the business of media and entertainment.

3
00:00:16,520 --> 00:00:20,640
Speaker 1: I'm Cynthia Littleton, co editor in chief of Variety Today.

4
00:00:20,680 --> 00:00:24,360
Speaker 1: My guest is Carlos Jimenez, Managing director of investment bank

5
00:00:24,520 --> 00:00:28,080
Speaker 1: Mollis and Co. Aimenez is a top dealmaker who is

6
00:00:28,120 --> 00:00:30,720
Speaker 1: in the thick of a busy period for media m

7
00:00:30,760 --> 00:00:34,080
Speaker 1: and a right now that gives him great perspective on

8
00:00:34,159 --> 00:00:36,880
Speaker 1: what it is that moves the market as the industry

9
00:00:36,920 --> 00:00:41,240
Speaker 1: realigns for the streaming era. As Jimenez explains, he sees

10
00:00:41,280 --> 00:00:45,760
Speaker 1: great potential as worlds collide in the emerging metaverse economy.

11
00:00:46,400 --> 00:00:52,239
Speaker 1: Jimenez details how he sees entertainment, live experiences, music, video games, sports,

12
00:00:52,240 --> 00:00:56,120
Speaker 1: and all kinds of other activities merging into businesses that

13
00:00:56,240 --> 00:00:59,440
Speaker 1: we can't even conceive of yet, but big money is

14
00:00:59,480 --> 00:01:03,320
Speaker 1: betting on him and is also addresses my eternal questions

15
00:01:03,560 --> 00:01:06,520
Speaker 1: about when the content bubble will burst and why we

16
00:01:06,600 --> 00:01:11,040
Speaker 1: are seeing such frothy evaluations for relatively small content players.

17
00:01:11,080 --> 00:01:21,160
Speaker 1: That's all coming up after this great Carlos Himenez, Managing

18
00:01:21,200 --> 00:01:23,440
Speaker 1: director of Mollis and Co. Thank you so much for

19
00:01:23,480 --> 00:01:26,080
Speaker 1: sitting down with me today in Century City. Yeah, no,

20
00:01:26,240 --> 00:01:29,560
Speaker 1: thank you for having me, Carlos. You are in the

21
00:01:29,800 --> 00:01:32,679
Speaker 1: thick of media M and A right now. You have

22
00:01:32,800 --> 00:01:36,480
Speaker 1: a long list of recent deals that stretches includes everything

23
00:01:36,640 --> 00:01:41,160
Speaker 1: from lions Gate's acquisition of three Arts ut as, acquisition

24
00:01:41,160 --> 00:01:46,000
Speaker 1: of Media Link, j TBC Studios, acquisition of CIA's w

25
00:01:46,240 --> 00:01:50,960
Speaker 1: I I P, Netflix bought a VFX firm, Candle Media's

26
00:01:51,000 --> 00:01:55,720
Speaker 1: investment in Will Smith's Westbrook Banner. A lot of activity

27
00:01:55,760 --> 00:01:59,200
Speaker 1: going on. I'd like to start by asking you from

28
00:01:59,240 --> 00:02:02,640
Speaker 1: what you see from the demand and what's driving the

29
00:02:02,840 --> 00:02:06,240
Speaker 1: M and A activity. Where do you see that the

30
00:02:06,280 --> 00:02:09,960
Speaker 1: big players and media entertainments see opportunity? What are they

31
00:02:10,040 --> 00:02:14,960
Speaker 1: trying to buy an assemble to position themselves for the future. Yeah,

32
00:02:15,080 --> 00:02:17,200
Speaker 1: that's a great question, Cynthia. I think there's a few

33
00:02:17,200 --> 00:02:20,400
Speaker 1: things happening. Um first, let me to maybe take a

34
00:02:20,400 --> 00:02:23,799
Speaker 1: step back, like why are we seeing all this deal activity?

35
00:02:23,960 --> 00:02:26,040
Speaker 1: If you if you really take a step back, you've

36
00:02:26,080 --> 00:02:29,959
Speaker 1: got number one content proliferating, right, everybody knows that story.

37
00:02:30,400 --> 00:02:33,200
Speaker 1: Fair number of TV shows out there these days. Yeah, exactly,

38
00:02:33,240 --> 00:02:35,880
Speaker 1: But I got my list of shows to catch up

39
00:02:35,880 --> 00:02:37,320
Speaker 1: on some of my clients, if they're listening to this,

40
00:02:37,400 --> 00:02:39,240
Speaker 1: are gonna be upset. And I haven't watched half of

41
00:02:39,280 --> 00:02:41,560
Speaker 1: them or three quarters of them. It's impossible. I don't

42
00:02:41,600 --> 00:02:45,760
Speaker 1: tell anybody, but my list is long too, so because

43
00:02:45,840 --> 00:02:47,720
Speaker 1: if you just start thinking about that right in terms

44
00:02:47,760 --> 00:02:50,080
Speaker 1: of the number of shows that are out there, um

45
00:02:50,160 --> 00:02:53,360
Speaker 1: and the content proliferation theme, you know, there's a bunch

46
00:02:53,360 --> 00:02:56,040
Speaker 1: of folks that are recognizing that, hey, there's a there's

47
00:02:56,040 --> 00:02:59,960
Speaker 1: a theme occurring here around how can we make return

48
00:03:00,000 --> 00:03:03,280
Speaker 1: earns off of that trend? And it's starting with the

49
00:03:03,320 --> 00:03:07,280
Speaker 1: content creation ecosystem. So the strategics need more, They need

50
00:03:07,320 --> 00:03:10,959
Speaker 1: their hit to reduce churn, to get people onto their platforms,

51
00:03:11,200 --> 00:03:15,040
Speaker 1: so they're craving more. You've got the independent production companies

52
00:03:15,080 --> 00:03:18,160
Speaker 1: that want to, you know, satisfy that demand, and then

53
00:03:18,200 --> 00:03:21,880
Speaker 1: you have the money that's basically chasing that opportunity to say, well,

54
00:03:22,440 --> 00:03:24,360
Speaker 1: gee whiz. Back in the day, used to be an

55
00:03:24,360 --> 00:03:27,600
Speaker 1: opportunity to own a library, to have steady cash flows,

56
00:03:27,639 --> 00:03:30,360
Speaker 1: to be a part of the ecosystem. Now, if we

57
00:03:30,400 --> 00:03:32,240
Speaker 1: know that I'm going to be able to sell five

58
00:03:32,360 --> 00:03:35,280
Speaker 1: ten fift TV series or films over the course of time,

59
00:03:35,680 --> 00:03:38,600
Speaker 1: to a specific counterparty. I'm gonna ride that wave. And

60
00:03:38,640 --> 00:03:41,160
Speaker 1: what's interesting, it's not just we're seeing it, not just

61
00:03:41,280 --> 00:03:45,200
Speaker 1: in the content creators themselves. The picks and shovels around

62
00:03:45,200 --> 00:03:48,120
Speaker 1: the industry is also been mean. You've probably seen deals

63
00:03:48,160 --> 00:03:50,920
Speaker 1: for like the real estate lots. You've seen deals for

64
00:03:51,320 --> 00:03:53,560
Speaker 1: one of our clients that we've represented many times, like

65
00:03:53,640 --> 00:03:58,000
Speaker 1: Casting Crew, which we sold twice. Payroll process. What's hotter

66
00:03:58,080 --> 00:04:01,240
Speaker 1: than payroll clerks right now? Exactly? So it's uh, it's

67
00:04:01,320 --> 00:04:04,840
Speaker 1: it's all driven by content booming. That's at its core,

68
00:04:04,880 --> 00:04:07,800
Speaker 1: that's really what's driving it. It's so interesting because I

69
00:04:07,840 --> 00:04:11,200
Speaker 1: see the content boom and I see I see so

70
00:04:11,320 --> 00:04:13,280
Speaker 1: many shows that we all can't keep up with, and

71
00:04:13,320 --> 00:04:17,760
Speaker 1: I wonder, how is all that capital that's going into production,

72
00:04:17,839 --> 00:04:19,919
Speaker 1: How is how is it going to get a return

73
00:04:20,640 --> 00:04:24,880
Speaker 1: that's you know, worth enough to make it worthwhile for

74
00:04:24,920 --> 00:04:28,520
Speaker 1: the for the producers I I have. I can't shake

75
00:04:28,560 --> 00:04:31,880
Speaker 1: the feeling that this is a very big bubble and

76
00:04:31,920 --> 00:04:33,480
Speaker 1: at some point it's going to burst on a lot

77
00:04:33,560 --> 00:04:36,600
Speaker 1: of people. That there's just no way that these shows

78
00:04:36,400 --> 00:04:39,360
Speaker 1: that at this volume can make the kind of margins

79
00:04:39,360 --> 00:04:44,160
Speaker 1: and returns that made sitcoms and dramas are really good business.

80
00:04:44,279 --> 00:04:49,040
Speaker 1: Am I just being too hide bound in my thinking? No, no, this,

81
00:04:49,160 --> 00:04:53,560
Speaker 1: And I think it's it's smart to be cautious whenever

82
00:04:53,600 --> 00:04:57,880
Speaker 1: you see everybody running into a sector. Okay, we're seeing it.

83
00:04:57,880 --> 00:04:59,960
Speaker 1: We'll talk maybe a little bit later about music another

84
00:05:00,279 --> 00:05:03,719
Speaker 1: place where we're seeing that happen. But in general, a

85
00:05:03,839 --> 00:05:06,000
Speaker 1: rising tide lifts all boats. And what I mean by

86
00:05:06,040 --> 00:05:09,120
Speaker 1: that is, you know, investors want to put capital to

87
00:05:09,160 --> 00:05:12,080
Speaker 1: work where they've got tail winds, where they feel like,

88
00:05:12,400 --> 00:05:13,839
Speaker 1: you know, they've got the win at their back in

89
00:05:13,920 --> 00:05:16,440
Speaker 1: terms of the capital being deployed. So if you know

90
00:05:16,839 --> 00:05:19,040
Speaker 1: that there's gonna be x number of shows are gonna

91
00:05:19,120 --> 00:05:21,680
Speaker 1: get picked up, even some of the tier two and

92
00:05:21,720 --> 00:05:24,160
Speaker 1: Tier three studios are going to get some of those projects,

93
00:05:24,160 --> 00:05:27,560
Speaker 1: it's just a lot of like numbers. So the key

94
00:05:27,760 --> 00:05:30,719
Speaker 1: is to make sure if I was an investor, that

95
00:05:30,760 --> 00:05:33,320
Speaker 1: I'd be partnering with the cream of the crop. So

96
00:05:33,600 --> 00:05:36,720
Speaker 1: are there places where there's a chance folks will not

97
00:05:36,800 --> 00:05:38,960
Speaker 1: do as well if you're partnering with some of those

98
00:05:39,000 --> 00:05:42,600
Speaker 1: studios where if there's a correction, if the content starts

99
00:05:42,640 --> 00:05:45,280
Speaker 1: slowing down for whatever reason, that's where you don't want

100
00:05:45,279 --> 00:05:46,880
Speaker 1: to be exposed. You need to be with the players

101
00:05:46,920 --> 00:05:49,400
Speaker 1: that you know, Uh, folks are going to be seeking

102
00:05:49,400 --> 00:05:53,200
Speaker 1: their high quality content and demanding it m So you

103
00:05:53,240 --> 00:05:56,599
Speaker 1: have to, as always choose your mate wisely, correct, correct.

104
00:05:56,880 --> 00:05:59,480
Speaker 1: There's a big difference between you know, partnering up with

105
00:05:59,520 --> 00:06:02,800
Speaker 1: one of the eminent studios that stand for quality content

106
00:06:03,120 --> 00:06:04,960
Speaker 1: versus someone who just showed up on the scene, maybe

107
00:06:05,000 --> 00:06:08,840
Speaker 1: had one head, got lucky, not a stable track. Records matter.

108
00:06:09,600 --> 00:06:11,599
Speaker 1: And we're saying, you know, I don't want to name names,

109
00:06:11,640 --> 00:06:15,960
Speaker 1: but we have seen some really high valuations for companies

110
00:06:16,000 --> 00:06:18,400
Speaker 1: that don't have a long tracker, companies that have only

111
00:06:18,440 --> 00:06:22,599
Speaker 1: been around for you know too three four years. How

112
00:06:22,760 --> 00:06:26,599
Speaker 1: do you think that some of those lofty valuations are

113
00:06:26,680 --> 00:06:28,880
Speaker 1: just a frothy market or do you think that there's

114
00:06:28,960 --> 00:06:33,960
Speaker 1: real like the the content creation business is changing so

115
00:06:34,040 --> 00:06:36,599
Speaker 1: much and the value is coming so much more to

116
00:06:36,640 --> 00:06:39,120
Speaker 1: the creators who are some of the you know behind

117
00:06:39,200 --> 00:06:41,840
Speaker 1: these companies that are getting very high valuations. Yeah, it's

118
00:06:41,839 --> 00:06:44,040
Speaker 1: a good question. Listen, multiples if you would have asked

119
00:06:44,040 --> 00:06:48,400
Speaker 1: me this ten years ago, um multiples for these types

120
00:06:48,440 --> 00:06:51,120
Speaker 1: of businesses, they traded at high single digit load double

121
00:06:51,160 --> 00:06:54,919
Speaker 1: digit multiples of epitall or cash flow. Now we're seeing

122
00:06:54,960 --> 00:06:59,320
Speaker 1: people pricing these in the thirty times forward one year.

123
00:06:59,440 --> 00:07:02,440
Speaker 1: If there's if there's more to it than just hey,

124
00:07:02,480 --> 00:07:05,080
Speaker 1: we're gonna sell a film or TV series, make a

125
00:07:05,120 --> 00:07:08,160
Speaker 1: costplus deal and try to collect some profits. There's got

126
00:07:08,160 --> 00:07:10,840
Speaker 1: to be a bigger picture, and it's oftentimes for those

127
00:07:10,840 --> 00:07:13,520
Speaker 1: businesses that are attracting those very high multiples. It's not

128
00:07:13,560 --> 00:07:15,960
Speaker 1: only just the growth of the content itself. It's getting

129
00:07:15,960 --> 00:07:20,880
Speaker 1: into adjacencies, whether it's direct to consumer, social, unscripted, other

130
00:07:21,000 --> 00:07:24,000
Speaker 1: parts or other facets of the of the content ecosystem.

131
00:07:24,280 --> 00:07:27,200
Speaker 1: That's really how people justify some of the numbers. And

132
00:07:27,320 --> 00:07:30,400
Speaker 1: having said that, these are elevated values, so we could

133
00:07:30,400 --> 00:07:32,720
Speaker 1: be here five years from now saying, wow, those good

134
00:07:32,720 --> 00:07:35,800
Speaker 1: times they were really good back then. How do you

135
00:07:35,880 --> 00:07:38,440
Speaker 1: One thing that I know is is challenging for people

136
00:07:38,560 --> 00:07:42,559
Speaker 1: right now is valuations, long term valuations. You know, what's

137
00:07:42,600 --> 00:07:45,960
Speaker 1: the value of an episode of a half hour comedy

138
00:07:46,440 --> 00:07:49,400
Speaker 1: Fifteen years ago, twenty years ago, the major studios controlled

139
00:07:49,400 --> 00:07:52,720
Speaker 1: the pipes, the distribution. You also had to roll the dice.

140
00:07:53,000 --> 00:07:55,640
Speaker 1: You made a big bet on a sixty seventy eight

141
00:07:55,720 --> 00:07:58,240
Speaker 1: million dollar rom Common or you had your avatar that

142
00:07:58,280 --> 00:08:00,360
Speaker 1: where you were hoping that you know, canyone was going

143
00:08:00,360 --> 00:08:04,000
Speaker 1: to deliver on a two picture Um that was then.

144
00:08:04,600 --> 00:08:07,320
Speaker 1: If you fast forward to today, you've got two options,

145
00:08:07,800 --> 00:08:09,240
Speaker 1: not a few options, I should say, if you're a

146
00:08:09,240 --> 00:08:11,360
Speaker 1: content creator. There's a few parties that are still doing

147
00:08:11,400 --> 00:08:14,320
Speaker 1: that obviously and doing well, although we're going to start

148
00:08:14,320 --> 00:08:18,320
Speaker 1: seeing from my perspective, fewer bigger temple films. One of

149
00:08:18,320 --> 00:08:21,360
Speaker 1: our other clients, AMC. You've obvious seen what Adam Marion

150
00:08:21,440 --> 00:08:24,720
Speaker 1: is trying to do with dynamic pricing. Um, they're everyone's

151
00:08:24,760 --> 00:08:27,040
Speaker 1: testing all over the risk. Okay, so even the pipes

152
00:08:27,080 --> 00:08:30,400
Speaker 1: are changing. But from a from the content creator's perspective,

153
00:08:30,800 --> 00:08:33,240
Speaker 1: you know, initially people who were saying, okay, we're going

154
00:08:33,280 --> 00:08:36,080
Speaker 1: to create you know, TV series that are like films

155
00:08:36,200 --> 00:08:37,840
Speaker 1: that worked for a while. One of our other clients

156
00:08:37,840 --> 00:08:40,200
Speaker 1: and r C House of Cards broke that was a

157
00:08:40,240 --> 00:08:42,320
Speaker 1: big breakout hit. Now you've got a ton of those

158
00:08:42,320 --> 00:08:45,920
Speaker 1: out there. Um, and you can make decent margins through

159
00:08:45,960 --> 00:08:48,560
Speaker 1: the cost plus model. Right, you're getting a margin on

160
00:08:48,640 --> 00:08:52,079
Speaker 1: top of licensing that to one of the big subscription platforms.

161
00:08:52,480 --> 00:08:56,600
Speaker 1: And yes, it's it's profitable. It's predictable as long as

162
00:08:56,600 --> 00:08:59,280
Speaker 1: the show stay out on air. But you're right, Cynthia,

163
00:08:59,760 --> 00:09:03,400
Speaker 1: the big massive syndication paid a does not exist. So

164
00:09:03,440 --> 00:09:06,640
Speaker 1: people are trading, you know, the grand slams for a

165
00:09:06,679 --> 00:09:10,800
Speaker 1: solid double effectively, and that's okay in the shortter medium run. Now,

166
00:09:10,840 --> 00:09:12,679
Speaker 1: one of the things that people are now picking their

167
00:09:12,679 --> 00:09:15,280
Speaker 1: heads up and saying, well, that's a nice business model,

168
00:09:15,320 --> 00:09:18,319
Speaker 1: but I sure wish there was a better margin than

169
00:09:18,400 --> 00:09:23,360
Speaker 1: just collecting okay. And what I'm seeing is people are

170
00:09:23,360 --> 00:09:25,560
Speaker 1: starting to take a step back and say, all right,

171
00:09:25,640 --> 00:09:28,080
Speaker 1: for if I'm gonna spend a seven million dollars for

172
00:09:28,120 --> 00:09:32,520
Speaker 1: a premium TV episode, um, ten do you call it?

173
00:09:32,559 --> 00:09:35,000
Speaker 1: Ten episodes in the series? That's seventy million dollars for

174
00:09:35,040 --> 00:09:39,120
Speaker 1: one season. That's a big bet. What if instead I

175
00:09:39,120 --> 00:09:43,240
Speaker 1: could pick up a really interesting documentary about a musician

176
00:09:43,840 --> 00:09:47,080
Speaker 1: that you recognize. Takeing a Billie Eilish that everybody knows.

177
00:09:47,679 --> 00:09:49,559
Speaker 1: You don't have to do a ton of marketing. Everybody

178
00:09:49,559 --> 00:09:51,800
Speaker 1: knows who Billy Eilish is. You make it for a

179
00:09:51,840 --> 00:09:54,720
Speaker 1: fraction of the cost. You spend all of that money,

180
00:09:54,760 --> 00:09:57,240
Speaker 1: you put that capital at risk, and then the return

181
00:09:57,320 --> 00:10:01,719
Speaker 1: could be five or six x, not one. I think

182
00:10:01,720 --> 00:10:05,280
Speaker 1: people are starting to realize that there's more efficient ways

183
00:10:05,320 --> 00:10:09,920
Speaker 1: of spending or putting capital at risk smaller dollars, not

184
00:10:10,040 --> 00:10:12,280
Speaker 1: rolling the dice on a hundred million dollar film, on

185
00:10:12,320 --> 00:10:14,640
Speaker 1: a smaller project called it three four or five million

186
00:10:14,679 --> 00:10:16,760
Speaker 1: dollars to get a dock off the road and then

187
00:10:16,840 --> 00:10:20,000
Speaker 1: ultimately sell it with grand slam er home run potential.

188
00:10:20,120 --> 00:10:22,560
Speaker 1: Now the dollars are smaller as you might imagine, but

189
00:10:22,640 --> 00:10:25,839
Speaker 1: I think people are starting to gravitate toward putting more

190
00:10:25,880 --> 00:10:28,200
Speaker 1: money carefully at risk. And you're also seeing it, by

191
00:10:28,240 --> 00:10:30,079
Speaker 1: the way, one of the other deals we just announced,

192
00:10:30,080 --> 00:10:34,280
Speaker 1: we just sold Industrial Media to Sony, an unscripted player.

193
00:10:34,320 --> 00:10:37,559
Speaker 1: They're an American idol, a bunch of other assets. If

194
00:10:37,559 --> 00:10:41,040
Speaker 1: you think about that play. Unscripted also lower price point.

195
00:10:41,360 --> 00:10:43,640
Speaker 1: But as we've seen from Netflix in a bunch of

196
00:10:43,640 --> 00:10:46,480
Speaker 1: the scripted players, they're starting to pick up that content

197
00:10:46,520 --> 00:10:48,599
Speaker 1: and they've come to the conclusion that the r O

198
00:10:48,760 --> 00:10:50,920
Speaker 1: Y on some of that, even though it's not premium,

199
00:10:50,960 --> 00:10:53,040
Speaker 1: it's working. When you look at the at the kind

200
00:10:53,040 --> 00:10:55,640
Speaker 1: of the landscape, you have your financial buyers and your

201
00:10:55,720 --> 00:10:59,600
Speaker 1: strategic buyers, people that want those assets for strategic reasons.

202
00:11:00,040 --> 00:11:02,160
Speaker 1: What's the balance of that right now? Do you feel

203
00:11:02,160 --> 00:11:06,120
Speaker 1: like there's more studios, more content companies that want to

204
00:11:06,160 --> 00:11:09,600
Speaker 1: get bigger in content or you finding a number of

205
00:11:10,040 --> 00:11:14,520
Speaker 1: financial investors that are really looking very more seriously at

206
00:11:14,520 --> 00:11:17,439
Speaker 1: the rate of return over a ten year period. I

207
00:11:17,440 --> 00:11:19,480
Speaker 1: think you're seeing both UM and one of the things

208
00:11:19,480 --> 00:11:22,240
Speaker 1: that's become a parents. It's obvious now with what Kevin

209
00:11:22,440 --> 00:11:25,040
Speaker 1: Tom and David Kest the moment Blackstone have done with

210
00:11:25,080 --> 00:11:28,240
Speaker 1: Candle Media, what you're going to see is there will

211
00:11:28,240 --> 00:11:32,520
Speaker 1: be another two or three or four of those established.

212
00:11:32,600 --> 00:11:34,480
Speaker 1: There will be newcomers, and I can't talk about it

213
00:11:34,520 --> 00:11:37,120
Speaker 1: too much, but they will be established and they are

214
00:11:37,120 --> 00:11:40,000
Speaker 1: attempting to do maybe in slightly different lanes, but it's

215
00:11:40,040 --> 00:11:45,040
Speaker 1: all around the same theme creating a scaled basically supplier

216
00:11:45,679 --> 00:11:49,280
Speaker 1: of content to the entire ecosystem. UM. If you think

217
00:11:49,320 --> 00:11:52,720
Speaker 1: about it, it's Cored's what you know. Obviously Candle is doing. UM.

218
00:11:52,920 --> 00:11:55,760
Speaker 1: We will see a few others and there's there's inklings

219
00:11:55,760 --> 00:11:59,120
Speaker 1: of that already happening. UM. The logical one that I

220
00:11:59,120 --> 00:12:00,839
Speaker 1: can't talk about because a to Kleina Mine, which just

221
00:12:00,880 --> 00:12:04,200
Speaker 1: did for example, we brought Apollo into legendary. You know

222
00:12:04,240 --> 00:12:06,640
Speaker 1: that was a smart investment on their part, but you

223
00:12:06,679 --> 00:12:09,840
Speaker 1: know there they've got bigger ambitions. Don't even think about

224
00:12:09,920 --> 00:12:13,080
Speaker 1: leaving the strictly business metaverse. We'll be right back with

225
00:12:13,160 --> 00:12:16,440
Speaker 1: more from Carlos Himenez of Mois and Co. After this break,

226
00:12:18,679 --> 00:12:20,920
Speaker 1: and we're back with more on Media M and A

227
00:12:21,160 --> 00:12:24,120
Speaker 1: from Carlos Himenez of Molis and Co. We certainly get

228
00:12:24,120 --> 00:12:26,120
Speaker 1: the sense, we know that there's a lot of dry powder,

229
00:12:26,160 --> 00:12:28,600
Speaker 1: that private equity has a lot of money out there

230
00:12:28,640 --> 00:12:32,040
Speaker 1: to place. Do you think will we see a big

231
00:12:32,080 --> 00:12:34,760
Speaker 1: play by a financial buy or do you think one

232
00:12:34,760 --> 00:12:37,720
Speaker 1: of the bigger private equity players will come in for

233
00:12:37,840 --> 00:12:41,480
Speaker 1: a significant studio type asset or a significant content asset

234
00:12:41,600 --> 00:12:43,520
Speaker 1: or do you think that's going to be really a strategy,

235
00:12:43,600 --> 00:12:47,320
Speaker 1: a game of strategic chess among the established Hollywood players.

236
00:12:47,520 --> 00:12:51,200
Speaker 1: I think it's hard for the financial guys to play

237
00:12:51,320 --> 00:12:54,360
Speaker 1: and compete with the big strategic assets. Let's take a

238
00:12:54,400 --> 00:12:57,880
Speaker 1: case in point MGM. Um. The number of financial players

239
00:12:57,880 --> 00:12:59,800
Speaker 1: that would have loved to own MGM at the right

240
00:13:00,040 --> 00:13:04,000
Speaker 1: ice were abundant. The number of inbound calls we got around, Hey,

241
00:13:04,040 --> 00:13:06,040
Speaker 1: what do you think about X, Y and Z um,

242
00:13:06,720 --> 00:13:10,840
Speaker 1: what is the incumbent strategy exactly? Having said that, you know,

243
00:13:10,880 --> 00:13:12,600
Speaker 1: when you take a step back and think about what

244
00:13:12,760 --> 00:13:15,599
Speaker 1: that Amazon could do with that asset in terms of

245
00:13:15,640 --> 00:13:18,480
Speaker 1: selling some additional shoes and toilet paper, there's way more

246
00:13:18,480 --> 00:13:20,520
Speaker 1: synergies than just being a pure play financial coming in

247
00:13:20,480 --> 00:13:22,360
Speaker 1: and take them that over. Hence why I went at

248
00:13:22,360 --> 00:13:24,680
Speaker 1: the price that I went for. And you also need

249
00:13:24,760 --> 00:13:27,600
Speaker 1: a level of you know, because you know, to put

250
00:13:27,640 --> 00:13:29,840
Speaker 1: that two and or fifty million into one movie, you

251
00:13:29,880 --> 00:13:32,640
Speaker 1: need a level of capital and investment that you can

252
00:13:32,800 --> 00:13:35,920
Speaker 1: you know that that can be balanced out over the

253
00:13:36,000 --> 00:13:38,800
Speaker 1: over the hits over the years if it need be, Yeah,

254
00:13:38,840 --> 00:13:40,800
Speaker 1: for sure. You know. The other there's other places though,

255
00:13:40,800 --> 00:13:44,920
Speaker 1: that are more logical places where you've seen financial capital

256
00:13:45,320 --> 00:13:48,680
Speaker 1: have more of a competitive advantage relative to you know,

257
00:13:48,720 --> 00:13:51,480
Speaker 1: assets like that where the strategics need the content or

258
00:13:51,520 --> 00:13:54,040
Speaker 1: the library. And this is you know I mentioned earlier

259
00:13:54,080 --> 00:13:57,080
Speaker 1: the picks and shovels in and around the content ecosystem.

260
00:13:57,160 --> 00:14:01,360
Speaker 1: Let's take for example, the talent agencies. Obviously that path

261
00:14:01,400 --> 00:14:04,600
Speaker 1: has already been laid for everybody. TPG has come in

262
00:14:04,640 --> 00:14:06,360
Speaker 1: and partnering with c A a long time ago. It's

263
00:14:06,400 --> 00:14:09,640
Speaker 1: been almost a decade phenomenal investment for them. When you

264
00:14:09,640 --> 00:14:11,560
Speaker 1: think about what that was, what was that that was

265
00:14:11,840 --> 00:14:15,640
Speaker 1: a derivative play on the proliferation of content. It was

266
00:14:15,720 --> 00:14:19,840
Speaker 1: taking the ten percent agent fee by representation to start

267
00:14:20,320 --> 00:14:23,160
Speaker 1: as opposed to just making it yourself and ultimately obviously

268
00:14:23,360 --> 00:14:27,920
Speaker 1: as blossomed into something far bigger. Same with obviously silver

269
00:14:28,000 --> 00:14:31,160
Speaker 1: Lake coming into endeavor and partnering with Ari. Same with

270
00:14:31,400 --> 00:14:34,320
Speaker 1: one of our close clients, U t A. We helped um.

271
00:14:34,400 --> 00:14:37,360
Speaker 1: We also helped bring in invest corps and PSP, so

272
00:14:37,440 --> 00:14:40,960
Speaker 1: there it was less likely that there was gonna be mergers,

273
00:14:41,040 --> 00:14:43,120
Speaker 1: you know, putting aside obviously the CIA I c M

274
00:14:43,120 --> 00:14:45,480
Speaker 1: deal recently, for the most part, they were kind of

275
00:14:45,520 --> 00:14:48,640
Speaker 1: all operating independently, and the capital came in and said

276
00:14:48,640 --> 00:14:51,680
Speaker 1: to themselves, well, the I'm not really competing against strategics,

277
00:14:51,960 --> 00:14:54,800
Speaker 1: so i have an opportunity to play the theme derivative

278
00:14:54,800 --> 00:14:56,920
Speaker 1: play and not get blown out of the water by

279
00:14:56,920 --> 00:14:59,280
Speaker 1: an Amazon who's gonna They're not gonna buy an agency.

280
00:14:59,360 --> 00:15:03,240
Speaker 1: So that's a place where, for example, financials are using

281
00:15:03,280 --> 00:15:07,440
Speaker 1: those as conduits to play the global idea without having

282
00:15:07,640 --> 00:15:11,600
Speaker 1: competition from strategics. And we're already seeing that in family

283
00:15:11,640 --> 00:15:15,120
Speaker 1: talent agencies, but management firms as well. We're seeing a

284
00:15:15,120 --> 00:15:18,440
Speaker 1: lot starting to come in there. Yeah, anything anyway, any

285
00:15:18,560 --> 00:15:23,800
Speaker 1: any way to get into the talent pipeline as Yeah,

286
00:15:23,840 --> 00:15:26,400
Speaker 1: for sure. I'll tell you. Um. We were fortunate to

287
00:15:26,440 --> 00:15:29,520
Speaker 1: help Three Arts, one of the larger talent manageming companies,

288
00:15:29,800 --> 00:15:32,120
Speaker 1: a few years ago. You know, we were helping them

289
00:15:32,160 --> 00:15:34,240
Speaker 1: try to figure out their destiny and said, you know,

290
00:15:34,280 --> 00:15:36,640
Speaker 1: we rent a process for them, and ultimately I remember

291
00:15:36,680 --> 00:15:39,080
Speaker 1: at the time, I was running around town talking all

292
00:15:39,120 --> 00:15:41,760
Speaker 1: the studio heads telling them, you know, here's the thesis.

293
00:15:41,840 --> 00:15:44,680
Speaker 1: You guys are going and throwing hundred million dollar, two

294
00:15:45,040 --> 00:15:47,440
Speaker 1: million dollar overall deals for one or two pieces of talent.

295
00:15:47,760 --> 00:15:51,280
Speaker 1: By the way, if they're they they are phenomenal executives

296
00:15:51,320 --> 00:15:54,280
Speaker 1: or phenomenal creators. That could pay off. But I said,

297
00:15:54,400 --> 00:15:57,640
Speaker 1: you know what, what if you instead owned a portion

298
00:15:57,720 --> 00:16:00,360
Speaker 1: of one of the talent management firms that present a

299
00:16:00,400 --> 00:16:03,000
Speaker 1: thousand pieces of talent, and you could have deal with

300
00:16:03,040 --> 00:16:07,080
Speaker 1: them where the talent itself got a better deal than

301
00:16:07,120 --> 00:16:09,320
Speaker 1: they normally would have been arms length with one of

302
00:16:09,360 --> 00:16:12,160
Speaker 1: the studios. It would be a win win. Talent wins

303
00:16:12,200 --> 00:16:15,080
Speaker 1: because they get better economics and then the studio wins

304
00:16:15,080 --> 00:16:17,960
Speaker 1: because they're getting additional deal flow from the talent management company.

305
00:16:18,200 --> 00:16:21,200
Speaker 1: The lions Gate Three Arts marriage. I know you helped

306
00:16:21,360 --> 00:16:25,560
Speaker 1: arrange in how four years later, what fruit has it born?

307
00:16:25,640 --> 00:16:29,040
Speaker 1: Have you? Has it been successful for both companies? Yes,

308
00:16:29,120 --> 00:16:32,160
Speaker 1: I think it's been a great partnership and um, you know,

309
00:16:32,360 --> 00:16:35,160
Speaker 1: obviously there's a deal term coming up soon. Um, but

310
00:16:35,160 --> 00:16:37,360
Speaker 1: we'll see how it ultimately shakes out. But so far,

311
00:16:37,360 --> 00:16:39,440
Speaker 1: if you asked, both sides has been it's been perfect.

312
00:16:39,680 --> 00:16:42,720
Speaker 1: And you're starting to see additional capital flow into that

313
00:16:42,880 --> 00:16:46,040
Speaker 1: exact same theme. So for example, Steve Cohen just backed

314
00:16:46,360 --> 00:16:49,920
Speaker 1: obviously Range uh and they're starting to build out their infrastructure.

315
00:16:49,960 --> 00:16:52,040
Speaker 1: So you know you're gonna see this theme for the

316
00:16:52,120 --> 00:16:53,960
Speaker 1: freight and it's not going to be just around traditional

317
00:16:53,960 --> 00:16:57,080
Speaker 1: talent management where you're representing, you know, the customary film

318
00:16:57,120 --> 00:16:59,520
Speaker 1: and TV stars. It's not just that it's the TikTok

319
00:16:59,600 --> 00:17:02,040
Speaker 1: stars all all of a sudden, it's the social influence,

320
00:17:02,040 --> 00:17:05,679
Speaker 1: the influencers. It's it's a far different game these days, Carlos.

321
00:17:05,720 --> 00:17:09,120
Speaker 1: I know that you're also involved in music and sports

322
00:17:09,320 --> 00:17:12,480
Speaker 1: and gaming, and all of these are areas that definitely

323
00:17:12,520 --> 00:17:15,679
Speaker 1: intersects with the core Hollywood film and TV business, but

324
00:17:15,840 --> 00:17:18,800
Speaker 1: now particularly in the area of music, it just seems

325
00:17:18,840 --> 00:17:22,400
Speaker 1: like they these two markets are so intertwined. We see

326
00:17:22,400 --> 00:17:26,000
Speaker 1: so much music on TV. TV really drives the needle

327
00:17:26,119 --> 00:17:30,560
Speaker 1: for for sales. What are you seeing? What? What? From

328
00:17:30,560 --> 00:17:33,600
Speaker 1: your perspective, what is driving the kind of the continued

329
00:17:33,640 --> 00:17:37,040
Speaker 1: sort of interconnectivity of these two markets. You know what's

330
00:17:37,040 --> 00:17:41,000
Speaker 1: interesting in music is um there's an even more so

331
00:17:41,040 --> 00:17:44,920
Speaker 1: than film and television. There's more capital flowing into that category.

332
00:17:44,960 --> 00:17:47,440
Speaker 1: And the reason for that is if you own a

333
00:17:47,480 --> 00:17:49,679
Speaker 1: piece of a show we just talked about earlier, you

334
00:17:49,720 --> 00:17:51,720
Speaker 1: get you don't know how many seasons is going to run.

335
00:17:51,960 --> 00:17:54,479
Speaker 1: Your margin is sort of fixed. Or if you own

336
00:17:54,520 --> 00:17:57,479
Speaker 1: a piece of library content, over time, it's going to decay. Right,

337
00:17:57,480 --> 00:17:59,879
Speaker 1: people aren't watching Casablanca as much as they used to

338
00:18:00,000 --> 00:18:02,879
Speaker 1: back in the day. It's a natural decaying asset. In music,

339
00:18:03,080 --> 00:18:06,000
Speaker 1: you're seeing a little bit of the opposite. Whereas no

340
00:18:06,040 --> 00:18:10,879
Speaker 1: one would have predicted that Roadblocks or Peloton was going

341
00:18:10,920 --> 00:18:15,439
Speaker 1: to start paying royalties on music. The streaming Spotify in

342
00:18:15,520 --> 00:18:17,439
Speaker 1: and of itself and all of the streamers, that's a

343
00:18:17,480 --> 00:18:20,160
Speaker 1: huge tail wind. But all these new dollars are starting

344
00:18:20,160 --> 00:18:23,520
Speaker 1: to trickle in from sources that never existed. So, whereas

345
00:18:23,720 --> 00:18:25,880
Speaker 1: you know film and television has a natural decay curve

346
00:18:25,920 --> 00:18:29,320
Speaker 1: for a library, music is actually starting to grow. So

347
00:18:29,359 --> 00:18:31,960
Speaker 1: you think about an asset class that's growing as more

348
00:18:32,000 --> 00:18:34,920
Speaker 1: and more devices are able to pull up any song

349
00:18:34,960 --> 00:18:38,800
Speaker 1: at any moment globally worldwide, and more and more places

350
00:18:38,840 --> 00:18:40,879
Speaker 1: where people need to pay a royalty for that music,

351
00:18:40,920 --> 00:18:44,080
Speaker 1: say TikTok for example. You see a number of people

352
00:18:44,520 --> 00:18:47,560
Speaker 1: plowing into that sector. So at its core though it

353
00:18:47,640 --> 00:18:50,600
Speaker 1: is it it's intellectual property, it's the same thing. It's

354
00:18:50,640 --> 00:18:53,639
Speaker 1: a creative you know, put their heart into a piece

355
00:18:53,640 --> 00:18:56,199
Speaker 1: of content, and now someone is taking advantage of the

356
00:18:56,320 --> 00:18:58,040
Speaker 1: you know, the fruits of their labor over time. We

357
00:18:58,119 --> 00:19:01,920
Speaker 1: certainly have noticed in the ask years, so a lot

358
00:19:02,000 --> 00:19:05,679
Speaker 1: of song catalog deals people artists with you know, with

359
00:19:05,840 --> 00:19:12,320
Speaker 1: sizeable songwriting archives, are really monetizing those rights quite significantly.

360
00:19:12,520 --> 00:19:15,040
Speaker 1: You think that's part of this sort of like rising

361
00:19:15,040 --> 00:19:17,760
Speaker 1: tide lifts all boats, for sure. I think the one

362
00:19:17,880 --> 00:19:22,000
Speaker 1: the number of buyers of those types of assets multiplied

363
00:19:22,520 --> 00:19:26,520
Speaker 1: and that drove prices up, which then led to the

364
00:19:26,560 --> 00:19:31,240
Speaker 1: owners of the intellectual property. The artist is starving, musician, etcetera. Say, hey,

365
00:19:31,400 --> 00:19:33,520
Speaker 1: the lawyers and representatives all of a sudden said it

366
00:19:33,560 --> 00:19:35,639
Speaker 1: might not be a bad time to sell into that market.

367
00:19:35,760 --> 00:19:39,000
Speaker 1: Multiples have gotten relatively high, so you've got more buyers,

368
00:19:39,440 --> 00:19:41,520
Speaker 1: more sellers coming out of the woodwork, and then you've

369
00:19:41,560 --> 00:19:43,720
Speaker 1: got both financials and strategics that are fine for some

370
00:19:43,760 --> 00:19:46,640
Speaker 1: of the same assets. It's a recipe for deal values.

371
00:19:46,680 --> 00:19:49,000
Speaker 1: And by the way, rightfully so, like I said, going

372
00:19:49,040 --> 00:19:51,960
Speaker 1: back to tail winds, rising tide lifts all boats. That's

373
00:19:51,960 --> 00:19:56,360
Speaker 1: exactly that you know, Universal Sony Warner. They're all doing

374
00:19:56,400 --> 00:20:00,200
Speaker 1: incredibly well because of the fact that the industries on fire.

375
00:20:00,280 --> 00:20:02,800
Speaker 1: So right now it's go, go, go now the one

376
00:20:03,240 --> 00:20:06,240
Speaker 1: the one caveat um just in least in today's environment,

377
00:20:06,600 --> 00:20:09,679
Speaker 1: putting you know, the geo political environment aside and the

378
00:20:09,680 --> 00:20:13,720
Speaker 1: exogenous shocks. As interest rates start to rise, people have

379
00:20:13,800 --> 00:20:17,359
Speaker 1: thought about music investments. It's almost like a bond where

380
00:20:17,520 --> 00:20:20,040
Speaker 1: it's so safe you make an investment, you're gonna get

381
00:20:20,040 --> 00:20:23,200
Speaker 1: a certain yield or certain fixed coupon if you will. Um.

382
00:20:23,240 --> 00:20:26,760
Speaker 1: As interest rates rise, I'm curious to see what happens

383
00:20:26,840 --> 00:20:30,760
Speaker 1: as dollars start flowing to more traditional places to part

384
00:20:30,840 --> 00:20:33,840
Speaker 1: your money, treasuries and the like, versus putting capital to

385
00:20:33,840 --> 00:20:37,080
Speaker 1: work in the music ecosystem. Do you think there's a

386
00:20:37,160 --> 00:20:40,159
Speaker 1: danger that at these high prices that people you know,

387
00:20:40,440 --> 00:20:42,639
Speaker 1: I mean, obviously there's risk in any investment, but do

388
00:20:42,680 --> 00:20:45,280
Speaker 1: you think that there has been as there as we've

389
00:20:45,320 --> 00:20:48,399
Speaker 1: seen with with content with you know, TV and movie

390
00:20:48,440 --> 00:20:50,720
Speaker 1: content TV in particular. Do you think there's been a

391
00:20:50,720 --> 00:20:52,439
Speaker 1: little bit of a too much of a rush in

392
00:20:52,480 --> 00:20:55,360
Speaker 1: the area of these song catalog sales. When you look

393
00:20:55,359 --> 00:20:58,639
Speaker 1: at just the PE ratio of the SNP five hundred

394
00:20:59,000 --> 00:21:03,159
Speaker 1: or the P ratio of technology companies just a couple

395
00:21:03,160 --> 00:21:06,560
Speaker 1: of months ago, they were at insane levels just if

396
00:21:06,600 --> 00:21:08,879
Speaker 1: you go charted out over the course of the last

397
00:21:08,880 --> 00:21:13,160
Speaker 1: twenty years. UM. I think it's less about the sector specifics.

398
00:21:13,200 --> 00:21:17,679
Speaker 1: Obviously there's there's impacts around the dynamics of each individual sector,

399
00:21:17,920 --> 00:21:19,840
Speaker 1: but I think it's more of like a global issue.

400
00:21:20,000 --> 00:21:23,399
Speaker 1: It's around every asset class. It's frothy. We're starting to

401
00:21:23,400 --> 00:21:25,560
Speaker 1: see a correction now. But I don't think it's just

402
00:21:25,640 --> 00:21:27,960
Speaker 1: about music, just about film or television. I think it's

403
00:21:28,520 --> 00:21:32,240
Speaker 1: in general it's inflationary. There's asset classes pressure and people

404
00:21:32,240 --> 00:21:35,360
Speaker 1: are just putting premiums on a lot of these assets.

405
00:21:36,200 --> 00:21:38,280
Speaker 1: Microsoft made a big deal just a couple of weeks

406
00:21:38,320 --> 00:21:42,479
Speaker 1: ago buying Activism Blizzard, a very significant video company. Do

407
00:21:42,480 --> 00:21:46,080
Speaker 1: you think we'll see more such consolidation among the E

408
00:21:46,280 --> 00:21:48,600
Speaker 1: A s and this you know, sorry, do you think

409
00:21:48,600 --> 00:21:52,520
Speaker 1: we'll see more such consolidation Electronic Arts as a big,

410
00:21:52,560 --> 00:21:57,199
Speaker 1: free standing company. On the future is going to be

411
00:21:57,240 --> 00:22:00,480
Speaker 1: all of these worlds colliding. Um. We talked a little

412
00:22:00,480 --> 00:22:03,840
Speaker 1: bit about sports betting, UM and the idea of media

413
00:22:03,880 --> 00:22:06,560
Speaker 1: companies and eyeballs partnering up with your ability to sit

414
00:22:06,600 --> 00:22:08,359
Speaker 1: on the couch watch the game in plays a bet.

415
00:22:09,119 --> 00:22:13,080
Speaker 1: I predict that in the future, Um, you're gonna have

416
00:22:13,119 --> 00:22:16,320
Speaker 1: all these gen zars or whatever the next generation is called,

417
00:22:17,119 --> 00:22:22,159
Speaker 1: playing an e sports tournament in the metaverse, okay, betting

418
00:22:22,160 --> 00:22:24,480
Speaker 1: on themselves. And it's going to be a massive market.

419
00:22:24,520 --> 00:22:27,440
Speaker 1: By the way, while listening to a concert inside of it.

420
00:22:27,520 --> 00:22:30,160
Speaker 1: And if you think about it, all these worlds are colliding.

421
00:22:30,200 --> 00:22:33,720
Speaker 1: It's the future, and I think where we're gonna end up. Carlos,

422
00:22:33,720 --> 00:22:36,240
Speaker 1: thank you so much for letting me, letting me um,

423
00:22:36,320 --> 00:22:38,760
Speaker 1: letting me play twenty questions with the top m and

424
00:22:38,840 --> 00:22:40,960
Speaker 1: a dealmaker. I want to ask you one a little

425
00:22:41,000 --> 00:22:43,720
Speaker 1: more personal question. How was it? What was it that

426
00:22:43,840 --> 00:22:46,919
Speaker 1: puts you on the path to where you are today?

427
00:22:47,600 --> 00:22:50,359
Speaker 1: That's a podcast in of itself, but I'll try to

428
00:22:50,400 --> 00:22:54,119
Speaker 1: give you the short version. Um, I came. I'm one

429
00:22:54,119 --> 00:22:56,400
Speaker 1: of those fortunate people that came from very humble beginnings

430
00:22:56,760 --> 00:23:00,000
Speaker 1: and very hard working parents that taught me that education

431
00:23:00,040 --> 00:23:02,520
Speaker 1: and mattered a lot and gave me the tools to

432
00:23:02,560 --> 00:23:05,439
Speaker 1: be able to steer me in the right direction. And

433
00:23:05,480 --> 00:23:08,040
Speaker 1: then I I bumped. Like everybody else or everything else

434
00:23:08,080 --> 00:23:10,080
Speaker 1: in life, you gotta get lucky a few times. I

435
00:23:10,119 --> 00:23:12,160
Speaker 1: got lucky a few times. I went to a good

436
00:23:12,160 --> 00:23:15,639
Speaker 1: school and then decided, Hey, this Wall Street think is

437
00:23:15,640 --> 00:23:18,320
Speaker 1: isn't so bad. It's kind of interesting and twenty plus

438
00:23:18,400 --> 00:23:28,159
Speaker 1: years later, Thanks for listening. Be sure to leave us

439
00:23:28,160 --> 00:23:31,400
Speaker 1: a review at Apple Podcasts. We love to hear from listeners,

440
00:23:31,960 --> 00:23:33,800
Speaker 1: and please take a moment to sign up for the

441
00:23:33,880 --> 00:23:38,040
Speaker 1: free Strictly Business newsletter at Variety dot com. We'll be

442
00:23:38,080 --> 00:23:41,160
Speaker 1: back next week with another episode of Strictly Business.