Ari Emanuel Calls Media M&A ‘Proof That Content Is in High Demand and Short Supply’

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Endeavor is well positioned for future growth even in a fast-consolidating marketplace because it has a foothold in most of the major entertainment sectors that are roaring back to life, Endeavor CEO Ari Emanuel told investors Wednesday in his first earnings call as the head of publicly traded company.

Emanuel, Endeavor president Mark Shapiro and CFO Jason Lublin fielded questions from top Wall Street media analysts for an hour as the company began the quarterly ritual of financial disclosures. Endeavor went public April 29 with an opening price of $24 a share. On Wednesday, the stock closed at $29.39.

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Emanuel was pressed on the question of how the big getting bigger in media — as demonstrated over the past two weeks with mega deals between WarnerMedia and Discovery and Amazon’s deal to acquire MGM — will affect an independent outfit like Endeavor, which has tentacles throughout the marketplace with its sports, live events, entertainment, marketing and talent representation assets.

“Warner-Discovery and Amazon-MGM is just further proof that content is in high demand and short supply,” Emanuel said. “There are a finite number of IP creators to meet that demand. That is increasing the value of the talent we represent and the content we own or represent. … “All the trends that power the Endeavor enterprise are really going to be fueled by this consolidation.”

Endeavor executives joined other media CEOs during the most recent earnings cycle to wax on about pent-up consumer demand for live events and other experiences. Shapiro enthused that robust sales for upcoming events “are lighting a fuse across the entire range of our businesses.”

Emanuel and Shapiro were also questioned about the uncertainty around theatrical exhibition and what the changing landscape of windows means for the A-lister actors and writers that WME represents.

“There’s no clear answer how this is going to happen,” Emanuel replied. “We’re one of the big players in that eco-system. We’re negotiating on behalf of our clients and our owned properties to make sure we get the proper economics going forward.” He noted that it will take some time “to find the proper floor” for what is the new industry standard for windowing of new movies.

Shapiro added that studios are being forced to compensate top talent for box office for abrupt changes to distribution strategies. “They’re paying for that flexibility,” he said.

Hollywood is focused on Endeavor’s evolution into a public company because it is the parent company of talent agency giant WME, Endeavor and other entertainment assets. The Q&A on the conference call made it clear that Endeavor’s growth involves everything from media rights sales in Europe, NFTs, sports betting, sports training at IMG Academy to the company’s On Location unit signing a long-term pact with the International Olympic Committee to provide luxury services to future Olympic and Paralympic games starting with 2024 summer games in Paris.

Shapiro noted that pandemic lockdown conditions wound up giving a boost to UFC, in part because it was one of the first sports-related events to resume activity last spring when the coronavirus threat shuttered virtually all sports, concerts and live events. The pandemic “accelerated UFC’s move into the mainstream,” he said. The stay-at-home environment attracted more fans to UFC, particularly those in the 18-34 demographic.

UFC is also benefiting from the growth of Disney’s ESPN Plus streaming service, which has a deal to carry UFC bouts including its pay-per-view offerings in the U.S.

“There’s no question the UFC is the biggest driver of the ESPN Plus platform,” Shapiro said, a boast that was backed up by executive commentary during Disney’s earnings call earlier this month. UFC’s fan base at present is 90% international, Shapiro asserted.

“We have a young demographic and we have a strong female fan base,” he said. “We are global.”

Among other highlights from the Endeavor call:

** WME helped assemble and sell more than 350 TV series last year. It’s unclear if that tally included projects produced through Endeavor Content.

** “Architecture” is Endeavor’s in-house slang for the company’s efforts to use assets in one area to build up another, i.e. developing Hollywood-related projects for UFC fighters. Shapiro said the system developed in 2019 with the help of Harvard Business School professors.

** Endeavor Content will remain a part of Endeavor through the end of the year. The company has agreed to divest the production-development arm after a long standoff with the Writers Guild of America, which targeted agency-owned production banners on conflict-of-interest grounds.

** Emanuel said he sees no curbing of enthusiasm for the eye-popping rates of spending on content by industry giants. “I do not believe this is slowing down for five years,” he said. “They’ve all committed strategically to (streaming platforms) and the linear players have to defend their old services. I don’t believe it’s slowing down in any capacity.”

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