When Hollywood power agency Endeavor offloaded its studio subsidiary Endeavor Content to South Korean entertainment giant CJ ENM for $775 million on Nov. 18, Wall Street analysts were unanimous in their praise, citing both financial and strategic upsides for the U.S. company.
The sale would provide a much-needed cash infusion for Endeavor after its $1.2 billion acquisition of sports betting platform OpenBet in September, and it “keeps the company well on-track” to reach its debt leverage target of less than four times by year-end 2022, said Barclays analyst Kannan Venkateshwar in a follow-up report.
“The deal also simplifies Endeavor’s overall structure and Hollywood story post writer’s strike,” says Peter Csathy, chairman of advisory firm CreaTV MediaNow, in a statement to The Hollywood Reporter, noting that the agency was obligated to divest at least 80 percent of its stake under the terms of a deal struck with the Writers Guild of America earlier this year. “Now, with this major divestment, Endeavor can stay ‘pure’ to its representation roots,” Csathy adds.
Many Hollywood insiders also have marveled at the price Endeavor Content was able to command. The studio has dozens of films and series in varying stages of production — management will stay in place and the unit will get a $120 million capital injection as part of the CJ ENM deal to further fuel that pipeline — but the company was only established in 2017, and the South Korean firm will be acquiring a relatively shallow pool of established IP with that $775 million sticker price (Endeavor co-produced hits include BBC America’s Killing Eve, AMC’s The Night Manager and Hulu’s Normal People, among others).
Following Amazon’s $8.45 billion deal for MGM and Reese Witherspoon’s majority sale of her Hello Sunshine production banner to former Disney executives Kevin Mayer and Tom Staggs at a valuation of some $900 million, the Endeavor-CJ deal clearly underscores what a sellers’ market high-end content producers continue to enjoy in an entertainment landscape dominated by the “streaming wars.”
For its part, CJ ENM has emphasized that the deal is just one part of a plan to ride the post-Parasite, post-Squid Game moment to greater global growth. The acquisition follows a $275 million strategic investment CJ made with Red Bird Capital Partners in David Ellison’s Skydance in February.
“At the end of the day, CJ ENM strives to become a major global studio that encompasses content that appeals to a global audience – like this deal with Endeavor Content, we will continue to expand our presence in the global market,” said Kang Ho-Sung, CEO, CJ ENM, when the deal was unveiled (CJ declined to comment for this story).
“CJ ENM’s acquisition of Endeavor Content underscores two fundamental truths of today’s entertainment new world order,” says Csathy of MediaNow. “First, content is king like never before, and CJ ENM picks up valuable IP and packaging capabilities that it can commercialize across multiple expanding platforms. And second, content is global like never before, and Endeavor Content gives CJ ENM the ability to both accelerate its growth and power in the U.S. and across other territories outside its native South Korea.”
What’s less immediately clear, analysts say, is exactly what shape CJ ENM’s longterm strategy will take in the wake of the acquisition. The dilemma the Seoul-based media giant faces — as it seeks to ride the ongoing success of Korean entertainment to a permanent place in the global content ecosystem — is one that would be familiar to the Hollywood studios during the early days of the streaming revolution, when the easy cash from licensed content was a deterrent from taking the tough keep-it-exclusive content decisions that launching their own platforms would entail.
Should CJ ENM, with its growing global production clout, simply continue the lucrative business of servicing foreign streamers by producing bankable Korean and international content and selling to the highest bidder? Or, should it seek to own some of the medium and the message, by further building out its own direct competitor with the foreign platforms? If the latter, the Endeavor deal could provide some powerful ammunition, both in the home Korean market and globally; but it will require enormous investment and total discipline. So far, the company appears to be sending somewhat mixed messages.
CJ ENM’s wildly successful Korean drama production subsidiary Studio Dragon inked a three-year strategic partnership with Netflix in 2019 to produce exclusive content for the streamer and also license it a large pool of shows. Studio Dragon’s scripted content — hits like Sweet Home, Mr. Sunshine, Crash Landing on You, and Hometown Cha-Cha-Cha — has been instrumental in establishing Netflix as a go-to destination for high-quality, wildly entertaining Korean drama, paving the way for the historic breakthrough success of Squid Game, the streamer’s most-watched show of all-time. Studio Dragon also has a deal to co-produce a TV series with Skydance Television for Apple TV+. Studio Dragon is publicly traded and has a market cap of just under $2.2 billion — and its production and licensing business with Netflix is thought to make up a sizable slice of its revenue. Disney+, which launched in Korea just on Nov. 12, will soon be calling for content, too — as will HBO Max when it eventually rolls out there.
Meanwhile, CJ ENM operates its own nascent streaming service, TVING, a joint venture with Korean search giant Naver and local cable network JTBC Studios (CJ holds 67.6 percent stake, Naver 15.4 percent and JTBC 14.1 percent). According to estimates from regional consultancy Media Partners Asia, Netflix currently leads the race among OTT services in Korea, with an estimated 4.7 million subscribers, ahead of Korean service Wavve (another local joint venture, this one between SK Telecom and South Korea’s three terrestrial broadcasters KBS, MBC, SBS) with 2.9 million, TVING with 2.1 million and Disney+ at 1.1 million so far.
CJ ENM’s executives have said they are determined to grow TVING. The streaming subsidiary is currently raising about $250 million (300 billion won) in a pre-IPO share sale, with Goldman Sachs and U.S.-U.K. private equity firm CVC Capital among the shortlisted investors. TVing is expected to receive its final bids from the shortlisted investors in January, with the entity’s proposed enterprise value pegged at about $1.26 billion (1.5 trillion won).
“In order to expand Korean content globally, we are planning to wade into the world’s over-the-top market in partnership with multiple major companies,” Yang Ji-eul, TVING’s co-CEO, said in an online media event in October, noting that the firm would was in talks to link up with Line, Japan and Southeast Asia’s most popular messaging app. “We will start our global service in Japan and Taiwan in 2022 and in the U.S. in 2023,” he added, also stating TVING has set a target of at least 8 million domestic Korean subscribers by the end of 2023.
But analyst believe that scaling TVING will require enormous amounts of both capital and CJ ENM-owned content held back exclusively for the service.
“You’re either producing great content and monetizing it globally for as good a price as you can get, or you’re putting that great content on your own platform to get closer to the customer to capture as much retail spend as possible,” says Vivek Couto, executive director at Media Partners Asia. “The question in this Korean context will be: Is there really a way to do some of both?”
A version of this story first appeared in the Dec. 1 issue of The Hollywood Reporter magazine. Click here to subscribe.
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