Why private equity investors in Europe are bullish on independent cinema – The Hollywood Reporter

Wall Street seems to have gone to Hollywood. Private equity firms, or PEs, are pouring money into entertainment content, funding independent production, and snatching up businesses on a level never seen before in the independent industry.

Landmark deals, like Kevin Mayer’s Tom Staggs and Candle Media (backed by private equity giant Blackstone Group) buying Reese Witherspoon’s Hello Sunshine shingle for $900 million, comedian Kevin Hart launches the new company media company Hartbeat with $100 million in backing from PE Group Abry Partners, a PE-backed investment group paying more than $4 billion to acquire television giant Banijay (Survivor, Peaky Blinders) or RedBird Capital taking a stake in SpringHill, LeBron James’ media company, point to a broader trend of so-called “smart money” placing its bets on content.

Some of the biggest players in packaging projects and inking deals on the Croisette have the backing of private equity groups, including European mini-majors Leonine and Mediawan – both funded by KKR – or Anton, the producer/ Anglo-French financial/commercial headed by Sébastien. Raybaud, who brought in private equity to help fund productions such as actor Gerard Butler Greenland and Cannes market projects such as Black Canary — a spy thriller by Taken director Pierre Morel with Kate Beckinsale — and Women, an LGBTQ+ revenge thriller starring George MacKay and Nathan Stewart-Jarrett. And teams from portfolio companies of Vine Alternative Investments Village Roadshow, EuropaCorp and Lakeshore Entertainment share a tent in Cannes.

“For the first time, we have a big wave of really smart money, private equity money, in Europe,” says Raybaud, CEO of Anton. “It’s a testament to the growth in the industry, the growth in consumption, the growth in appetite that we’re seeing for all types of films, both arthouse and commercial. .”

Cannes is about to get even closer to the EP. Iris Knobloch, who will succeed Pierre Lescure as Cannes Film Festival president in 2023 (becoming the first woman to hold the position), is also the head of I2PO, a private equity-backed group created last year. for the purpose of acquiring entertainment companies. through Europe.

The bet private equity investors are making is that the explosive growth of streaming services will lead to a similar boom in demand for content. And that the companies that own the intellectual property, original movies and TV shows that streamers need, will be best positioned to benefit. Many see particularly strong growth potential in Europe, where European Union (EU) content quotas for SVOD platforms – 30% of all content on streaming services in Europe must be European-made – have created a guaranteed demand for original and local films and series. that most streamers won’t be able to complete on their own.

“We are just starting to see the impact of EU quotas,” says Raybaud. “With the number of SVOD subscribers in Europe growing steadily and more SVOD players entering the market, the opportunities for independent, European-based studios with access to home IP and PE capital , have never been bigger.”

Instead of signing an exclusive release deal with a single streamer — like Steven Spielberg’s Amblin Partners, Spike Lee’s 40 Acres and a Mule Filmworks, and Vanessa Kirby’s Aluna Entertainment did with Netflix — many creatives are now using the backing investment capital to stay independent and sell their wares to the highest bidder.

“In today’s market, there’s a huge upside to staying agnostic about who you bring your projects to,” Thomas Benski, co-founder of Pulse Films (Pig, Mughal Mowgli), Told THR at Cannes.

Benski seeks to exploit PE sources to help director Yann Demange (’71, White Boy Rick) is developing and funding content for its Wayward shingle, which will roll out multiple film and TV projects later this year.

Even with all their new PE money, however, the Indies remain dependent on global streamers for distribution. And, as one high-profile US studio executive noted, “it’s never been possible to scale a content business if you don’t own your distribution.” If streamers are moving away from licensing third-party movies and shows in favor of producing most of their content in-house, or if the influx of new capital inflates the cost of production beyond profitability , the current growth market for freelancers and their appeal as private equity investments, could disappear.

“We are already seeing this inflation of talent costs, costs for studio space, for teams, everything,” admits Raybaud. “But the market is bigger and growing now, so I don’t see that as a barrier to growth. … Private equity will continue to come into the business. You’ll see some great deals and some dumb deals, but the general direction of the market is positive.”

Georg Szalai contributed to this report.