Private Equity Turn Money-Losing Streamers into Money-Making Opportunity

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If someone spends money, someone else has to make money. That is a simple calculation some private equity firms are applying as streaming services drop reams of cash in their relentless pursuit of viewers, with little apparent concern for the red color of their bottom lines.

Last year, firms were buying up billions in soundstages. This year, their target is the Hollywood production companies that create the content streamers buy to fight for the attention of billions of eyeballs.

“This is How I Win”

The top eight streaming companies in America are slated to spend $115 billion on content this year. Spending that much money would be an unquestionably great idea if it led to a profit or massive growth… but it’s, er, not. Last year, Comcast’s streaming service Peacock lost $1.7 billion, more than double the $778 million in revenue it brought in, while Disney’s streaming unit lost about $600 million. Netflix shares, beset by disappointing-at-best subscriber numbers, are down 45% from a record high in November. Streaming adoption in the US slowed to just 1% in the last quarter of 2021, according to Conviva.

Private equity firms, betting that streamers will keep spending on prestige content for years to come no matter these numbers, are positioning themselves to be the streaming industry equivalent of a gameshow contestant in a money booth:

  • Last week Apollo Global spent $760 million on a stake in China’s Legendary, the movie studio that made Dune and Godzilla; Blackstone is funding a new production company, Candle, to the tune of $2 billion that has already bought Hello Sunshine — producer of HBO’s Big Little Lies and Apple+’s The Morning Show for $900 million — along with Cocomelon producer Moonbug and Netflix’s Fauda producer Faraway Road.
  • Two of the most prestigious indie film producers — A24, which blessed the world with a million Adam Sandler memes with Uncut Gems and made Oscar Best Picture winner Moonlight, and Village Roadshow, which financed Joker — are exploring sales, according to The Financial Times.

Never Enough: Even though you could already binge-watch TV until the heat death of the universe at this point, last year TV channels and streaming services produced a record 559 scripted English-language shows, 13% more than in 2020.