Market Update | 2020
With many in the United States still under “shelter in place,” the entertainment sector showed pockets of resilience in Q2, largely driven by demand for streaming video and music. While cord-cutting and the concurrent shift to streaming are not new themes in this sector, COVID-19 has helped accelerate and magnify several existing key trends.
We discuss several takeaways that we have seen from recent events:
MVPD subscriber attrition reached all-time highs—nearly 9%YoY in Q2—as customers flocked to Netflix (which grew 27% YoY in Q2) and Disney+, along with new services that launched, such as HBO Max.
Continuing its previous growth trajectory, Disney+ reached its five-year subscriber target in less than 12 months, adding 24 million subscribers in Q2. This is in contrast with Quibi, which has failed to find traction.
Netflix’s model for content production and acquisition proved more resilient to COVID-19 shutdowns, as the service was able to add more than 1,300 new episodes in H1 (including shows that captured the public imagination, such as Tiger King and Floor Is Lava), nearly 800 more episodes than any competitor, and was rewarded as the only service among its peers to see frequent usage increase from Q1 to Q2.
While limited commutes and other out-of-home activities have shifted listening habits, the streaming of both music and podcasts continued to increase in Q2, driving streaming platforms to diversify their audio offerings and explore new partnerships with labels to navigate a changing ecosystem.
M&A and financing activity remains robust despite the broader market volatility, which is highlighted by the IPO of Warner Music Group; the merger of Eros and STX; Fox’s acquisition of Tubi; SiriusXM’s acquisition of Stitcher; CuriosityStream’s acquisition by the SPAC Software Acquisition Group; and TV Azteca’s investment in Deezer. We expect this active M&A and financing environment to continue.
We hope you find this update to be informative and that it serves as a valuable resource to you in staying abreast of the market in these turbulent times. Given the fast-changing market in this current environment, we would be happy to discuss these developments in real time and look forward to staying in touch with you.
Video Game Industry
Market Update | 2020
Houlihan Lokey is pleased to present an assessment of the video game industry for summer 2020.
The global games market has experienced a surge in users, engagement, and spending as a result of the COVID-19 pandemic.
COVID-19 has pushed gaming further into the mainstream, attracting a new and broader base of gamers.
The importance of social and community-based games is heightened as users look to games as a way to connect with friends and families.
In the absence of traditional live sports, esports is having its moment under COVID-19, with several games receiving their first appearance on linear U.S. networks.
The games industry outlook is attractive, with growth driven by a combination of factors, including:
– Continued growth in mobile
– The drive to cross-platform games and social/immersive game play
– Advancements in next-gen technology, including 5G and cloud gaming
– Robust outlook for esports
M&A and financing activity remains robust despite the broader market volatility, highlighted by Zynga’s acquisition of Peak Games, AppLovin’s acquisition of Machine Zone, and Stillfront Group’s acquisition of Candywriter. We expect this active M&A and financing environment to continue.
We hope you find this update to be informative and that it serves as a valuable resource to you in staying abreast of the market in these turbulent times. Of course, in this fast-changing market environment, we would be happy to discuss these developments in real time and look forward to staying in touch with you.
Sports Industry Considerations – Summer 2020
Houlihan Lokey is pleased to present its sports industry overview for summer 2020. We have included industry insights and select transaction announcements to help you stay ahead in the dynamic and constantly evolving sports sector.
Driven by growing national and local media rights deals, digital platforms, and increased sponsorship monetization, recent years have witnessed several blockbuster acquisitions in the major U.S. professional sports leagues. We expect activity to remain high, especially for minority ownership stakes, for the foreseeable future as franchise assets remain scarce and institutional buyers enter the marketplace with increasing demand.
Please download our market update to learn more.
Articles on COVID-19 and Entertainment Industry Issues
The Ripple Effects of COVID-19 on NCAA Athletics and Eligibility
In early August, the National Collegiate Athletic Association (NCAA) Board of Governors issued requirements for fall sports, simultaneously directing its member schools and conferences to meet these requirements in order to conduct NCAA fall sports and each of its three divisions to determine its ability to meet those requirements to conduct fall championships.
Telemarketing Restrictions During Emergencies
Over the last several months, telemarketers have confronted a new reality that forces them to understand the implications of declarations of public health and other emergencies issued by local, state, and federal governmental agencies. Various jurisdictions have telemarketing restrictions that are triggered upon such declarations, making recent months and the foreseeable future a particularly tricky time to operate a telemarketing business.
Lessons in Media Buying for a Post-Covid World: Super Bowl Edition
In May, I wrote a blog post entitled, “Lessons in Media Buying for a Post-Covid World,” which encouraged advertisers to negotiate for flexibility and to focus on the cancellation terms that applied to their advertising commitments with media suppliers. Well, it’s now September. We are certainly not living in a “post-Covid world,” nor is there the same abundance of new content to run advertising against that existed in the spring, when we were all Netflix bingeing our way through the pandemic. But my advice remains the same — and advertisers are taking it to heart, trying to negotiate for “outs” and flexibility, above all else, in their upcoming media buys. This is especially true for Q3 and Q4 media spending that is contingent on one of America’s favorite fall traditions — football season and, of course, the Super Bowl.