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BFD Expert Voices - Media Deals

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The tie-up between WWE and UFC immediately puts Ari Emanuel and Endeavor toward the top of the sports and live event space. But it comes with a cost, Tim writes.

Why it matters: The deal is a huge PR win for Emanuel, who risked his company two years ago by taking it public. It's also going to challenge Endeavor's debt-burdened balance sheet.

Endeavor's stock price dipped more than 2% in morning trading after the deal was announced.

The big picture: The new UFC-WWE company (trading under a very fitting "TKO" ticker) should have no shortage of investor interest. But buying into Endeavor now becomes less enticing without the popular combat sports league.

Last year, UFC was the main reason that Endeavor's sports business — which also features the Professional Bull Riders league and EuroLeague basketball — grew revenue by 20% to $1.3 billion, accounting for nearly a quarter of its total revenue.

Though Endeavor paid down $500 million of its debt last year, it still carries more than $5 billion in long-term debt.

Catch up quick: Endeavor this morning announced it was buying WWE and merging it with UFC into a separate company.

The all-stock deal values UFC at $12.1 billion and publicly traded WWE at $9.3 billion, the companies said in a regulatory filing.

When the deal closes later this year, Endeavor will hold a 51% controlling interest in the newly combined company, and WWE shareholders will hold the remaining 49%.

The two companies will be run separately under the yet-to-be-named company.

What's next: The WWE and UFC will negotiate their linear TV rights separately from one another, but could partner on a combined streaming deal, WWE president Nick Khan tells Sara Fischer in an interview this morning.

WWE's linear TV rights deals with NBCUniversal and Fox expire next year. Its streaming deal with NBCUniversal's Peacock expires in 2026. UFC's media deal with ESPN, which includes giving ESPN+ the exclusive rights to all UFC pay-per-view matches, expires in 2025.

"The most important thing is that NBC and Fox, from a WWE point of view, feel respected in the process," Khan said. "So we're going to enter those conversations with them." The right of first refusal "just starts now."

Khan continued: "If we're not able to do that, we'll see what the marketplace has to say and ultimately, you know, choose the right partner for the WWE audience in our shareholders."

Ari Emanuel risks Endeavor with WWE-UFC spin

1 big thing: Ari's risky bet 

Ari Emanuel. Photo by Chris Unger/Zuffa LLC

The deal value for global M&A activity in media and entertainment dropped 84% in the first quarter of 2023.

Why it's the BFD: Value in media and entertainment shrunk the most compared to other sectors tracked by Refinitiv, Kerry writes.

By the numbers: Activity in the sector dropped to $9 billion compared to $56.3 billion in the prior year's first quarter, per Refinitiv. 

The number of deals decreased by 26% to 649. 

Deal value in the telecommunications sector dropped 68% to $11.9 billion. 

Of note: This has been the slowest first quarter for global M&A since 2013, Axios' Dan Primack writes. 

What they're saying: At Tulane Law's conference last month, JPMorgan's global head of M&A Anu Aiyengar said, "[T]here's a perception that if you launch a sale process today, proactively, maybe there's something wrong with you."

"The [rates] uncertainty is what dampens the appetite for dealmaking," Suzanne Kumar, a VP with Bain & Co's global M&A practice, tells Axios' Kate Marino. "It's less about the level and more about the ability to make an assumption about what interest rates will be."

Deal value in media and entertainment plunged 84% in Q1

2. The BFD: Deal activity plummets in Q1

Illustration of a person standing on a downward trend line, looking down.

3. Tweet of the day

• The Financial Times acquired a majority stake in Endpoints News, a U.S. news organization covering the biopharmaceutical industry. https://axios.link/431y1EP

• Rugby Australia is seeking investors for up to a 20% stake in the league, per Bloomberg. https://axios.link/3KwPP3H

• ⚽ Oaktree Capital Management made a preliminary offer to invest €1.75b into the media business of Italy's Serie A soccer league, per Reuters. https://axios.link/3U427DC

• Providence Equity Partners is facing opposition to its proposed £481m takeover of British events organizer Hyve Group, per the FT. Three top Hyve shareholders — M&G, Redwheel and Blackmoor Investment Partners — plan to vote against the deal. https://axios.link/40I9wLy

• 🍿 Cineworld reported it has entered a restructuring support agreement that would reduce its indebtedness by $4.53b and emerge it from Chapter 11 proceedings during the first half of 2023. https://axios.link/3ZCBnuY

• National CineMedia negotiated a second extension of the grace period on interest payments. https://axios.link/3Kcfsp4

4. Deal flow

• 🎥 Netflix film shuffle: The streamer is restructuring its film group and will make fewer movies per year. Two longtime executives will depart: Lisa Nishimura, who was responsible for documentaries and smaller-budget films, and Ian Brickle, a VP in the division. https://axios.link/3Zt8UaZ

• Joe Quesada, former Marvel Comics editor-in-chief and ex-Marvel Entertainment chief creative officer, signed an exclusive first-look film and television deal with Amazon Studios. https://axios.link/3ziKMgN

• Arianna Bocco stepped down as president of IFC Films. Scott Shooman, head of acquisitions, will serve in the interim. https://axios.link/42TXDUd

• Quantcast appointed Andrew Double as VP of commercial, North America. https://axios.link/3U30s12

• Audiochuck hired Jason Hoch as CEO and chief creative officer of the WAVLAND network, a new podcast network. He was most recently the president of podcasts for Imperative Entertainment. https://axios.link/3U5xQ7t

5. Movin' on up (or out) 

👩‍💻 How networks and streamers are prepping for a potential writers strike (THR)

"The real effects of any prolonged labor action — the 2007-08 strike lasted 100 days — would likely show up more in the fall, when dozens of shows begin new seasons. As a hedge against a long walkout, broadcast networks have handed out more early renewals than in a typical year," Rick Porter and Lesley Goldberg write.

📰 Inside the Guardian's civil war over trans coverage (Semafor)

"Perhaps the only thing The Guardian has going for it, staffers said, was that it doesn't have Slack. The organization is still doing everything the old fashion way: Lengthy reply-all email threads," Max Tani reports.

🇨🇳 Lawmakers to meet with Iger, Cook, other execs about China (Axios)

"A bipartisan group of lawmakers is planning a three-day trip to Hollywood and Silicon Valley this week to meet with CEOs and top executives at Disney, Apple, Alphabet, Microsoft and more," Sophia Cai and Sara report.

6. Channel surfing

Illustration of a remote control in the shape of a surfboard leaning against a VW bus.

🍎 Situational awareness: Apple CEO Tim Cook is the cover star for the April/May 2023 issue of GQ.

@tim_bays: San Diego State vs. UConn on CBS. Nobody outside of La Jolla believed the Aztecs would be one win away from a National Championship. 

@kerrymflynn: Snarky Puppy on Apple Music. Discovered this jazz band last weekend in Memphis. The drummer is touring with Toto.

✏️ Thanks to George Moriarty for editing and Katie Lewis for copy editing this newsletter.

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April 03, 2023

1 big thing: Ari's risky bet