MUMBAI: When it’s the Murdochs you have to think big. Big with a capital B. No less. Consider the 21st Century Fox’s latest announcement that it has entered into a preliminary agreement, with funds managed by affiliates of private equity (PE) firm Apollo Global Management to form a joint venture that seeks to bring the Shine Group, Core Media Group, and Endemol under one umbrella.
The new initiative has conditions attached. It will have to be jointly owned and managed by the two groups. 21st Century gave no assurances that the proposed transaction would be completed.
But if it does go through, it will create the world’s largest independent production engine (estimates are that its valuation will be in the region of $2 billion). The proposed Apollo 21st Century joint venture will boast a roster of shows such as Big Brother, Deal or No Deal, The Money Drop and Your Face Sounds Familiar, Total Wipeout, The Million Pound Drop Live, Peaky Blinders and Ripper Street (under Endemol); MasterChef, The Face, The Biggest Loser, The Bridge and Broadchurch (through Shine) and So You think You can Dance and American Idol (through Core Media).
Both 21st Century and Apollo have their own compulsions to make the deal happen, though how it will happen is not clear. Shine, Endemol and Core Media own a complex web of production companies worldwide headed by various senior executives.
Apollo, for its part, has been eager to consolidate its TV production holdings through Endemol and Core Media and even find a partner to further its global ambitions. It has $125 billion in assets in several sectors in its portfolio.
Apollo wanted a piece of the content production pie and forayed into TV production when it acquired CKX Media (along with it came Simon Fuller’s 19 Entertainment which co-owns the Idol format franchise) in 2011, renaming it later as Core Media.
The PE firm then went on to expand its TV production presence by acquiring a stake in Endemol after buying out owners Goldman Sachs and Sylvio Berlusconi’s Mediaset in 2012. Endemol has a presence in 30 countries through 90 companies, makes more than 15,000 hours of programming every year for 300 broadcasters and has a handsome catalogue of 2000 formats.
Apollo currently co-owns Endemol with Cyrte Investments (a fund closely associated with Endemol founder John de Mol and now renamed as Daysim Investment Strategies). It tried to merge Core and Endemol but backed off when de Mol opposed the move in 2012. De Mol, for his part, attempted to unite Endemol with his current media vehicle Talpa Media earlier this year, but jettisoned the deal when the sticker price went up.
Earlier, in 2012, Apollo explored the possibility of fusing Endemol and Core Media with investment from former News Corp CEO Peter Chernin’s Chernin Entertainment. But the discussions were aborted.
Murdoch has his own imperatives to make the deal happen. It gives 21st Century the opportunity to exit from the Shine group, which was acquired by News Corp in 2011 for $675 million. He had come under severe criticism of nepotism as Shine was founded and run by his daughter Elisabeth, who now functions as its chairman. Today, Shine is owned by 21st Century after Murdoch restructured News Corp into two units – News Corp and 21st Century – following the phone hacking and police bribery scandals in the UK. And it has 26 production companies across 11 countries including Shine TV, Shine America, Judos Film & TV and Princess Production in its portfolio.
The deal is an indication of how Murdoch sees his media empire structured going forward. His movie production and television broadcasting businesses figure under a single vehicle 21st Century. His newspaper and publishing interests under News Corp. His satellite, platforms and pay TV business under British Sky Broadcasting (BSkyB - has recently announced that it has made an offer to acquire 21st Century’s investment in Sky Deutschland and Sky Italia, leading pay TV platforms in Europe).
BSkyB, Sky Italia and Sky Deutschland are owned by 21st Century with differing equity stakes. And his content production business is now slated to be under the joint Apollo and Shine venture.
The proposal is timely. The content production landscape is undergoing a wave of consolidation: recently, Discovery Communications and Liberty Global agreed to buy UK production company All3Media for $930 million and Britain's ITV snapped up 80 per cent of Leftfield Productions for $360 million.
Agglomeration in content production in Europe and the US is following in the wake of consolidation in the pay TV business, where companies such as Comcast are showing an urge to merge in order to strengthen their negotiation power with content providers.
The Apollo-21st Century joint venture, if it goes through according to reports, will also focus on expanding the combined entity’s focus beyond unscripted formats to scripted shows and on digital productions for online and over the top service providers. And, if it does get realised, it could spark off another wave of acquistions by other content producers as they try and join the getting-scale race too.
