Outperformance Returns in Live Entertainment and Media

What investment strategies are essential for scaling immersive experiences that blend digital and physical realms, ensuring they remain personalized and engaging? How will the fusion of advanced technology and storytelling in feature films expand global market opportunities? And, how can investors leverage digital enhancements and interactive features within live events to maximize revenue streams beyond traditional models, shaping the future profitability of live entertainment?

In the latest special report by Offmarket Investments and The Future of Luxury, both by Summit Communication Group, we follow the capital flows happening in the live entertainment and media sectors to explore this dynamic landscape, for our capital partners and private equity firms, in pursuit of answering these pivotal questions.

"The dynamics of financial investments are changing, reflecting a broader shift in consumer values and expectations. Entertainment is not just an industry; it's a cultural force driving economic trends." Christine Lagarde, President of the European Central Bank

Playbook for the Live Entertainment Sector

Founded in 2017 by James Barton, a pioneer in festival promotion and the former president of electronic music at Live Nation Entertainment, and Roderik Schlosser of Providence Equity Partners, Superstruct Entertainment has quickly ascended to become the world's second-largest festival promoter, trailing only behind Live Nation Entertainment. This growth was catalyzed by strategic moves and notable partnerships within the industry.

In a significant expansion of its music interests, Providence Equity Partners invested in Wasserman, a major agency giant, during 2022. Additionally, its investment portfolio includes the Ambassador Theatre Group, TAIT, and as of 2021, Sweetwater — a top US retailer of musical instruments and audio equipment. The firm's recent acquisitions also include the audio specialists at d&b group and a minority stake in Populous, a leading architectural firm renowned for projects such as Wembley Stadium in London and the Las Vegas Sphere, spanning a portfolio of over 3,000 projects.

"Digital transformation has moved from an option to a cornerstone of strategy, particularly in industries like media and entertainment, where the first to leverage new technologies can change the landscape entirely." Ginni Rometty, Former Chairman, President, and CEO of IBM

Last year, Legends, supported by Sixth Street and specializing in premium experiences, disclosed its plans to acquire venue management titan ASM Global. This anticipated $2.4 billion transaction aims to create a global powerhouse in premium live events.

Silver Lake, a private equity firm rooted in Silicon Valley, has been particularly active, announcing its intention to acquire all outstanding shares of WME | William Morris Endeavor's parent company, Endeavor. The firm initially invested in WME in 2012, took over the fashion and sports-focused IMG for $2.4 billion in 2013, and combined these acquisitions under the Endeavor umbrella in 2017. In 2019, Silver Lake also purchased Australian live entertainment leader TEG from Affinity Equity Partners in a deal valued at approximately $1.3 billion (AUD) and made investments in Oak View Group and Fanatics.

"We've moved past the age where entertainment was a passive experience. The future is about engaging directly with audiences, giving them a seat at the table and redefining what entertainment means." Ari Emanuel, CEO of Endeavor

Global investment powerhouse Blackstone entered the scene in 2018, purchasing NEC Group in the UK for upwards of £800 million, and is now poised to take over Hipgnosis Song Management. In the same year, Waterland Private Equity, a Dutch multinational firm, consolidated six leading Scandinavian promoters and agencies under the All Things Live Sweden.

The dynamic of private equity in live entertainment was further underscored when Artémis, led by billionaire Francois-Henri Pinault, acquired a majority stake in Creative Artists Agency (CAA) from TPG, which had increased its share from 35% to 53% in 2014 for $225 million. EQT Group also entered the fray, becoming the largest external shareholder in United Talent Agency (UTA).

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Ron Burkle’s Yucaipa Companies made multiple additions to its live entertainment portfolio in 2022, including Day After Day Productions. Yucaipa had already acquired interests in various booking agencies and live music platforms, culminating in the merger of APA and AGI into the Independent Artist Group (IAG).

Further illustrating the sector's growth, GTCR LLC invested in the American ticket exchange Vivid Seats in 2017, and the newly announced SXSW London event will be produced under license by Panarise, a company tied to Ali Munir of Penske Media Corporation .

Chambers, a seasoned ticketing advisor and consultant, critically assessed the intersection of private equity and live entertainment, stating, "The PE strategy is to increase the volume of events by extending the territorial reach, improving the physical environment where events occur, and by then extracting more from audiences via value-add bundles, packages, and surge-pricing." He concluded that the extensive consolidation and capital influx in the live entertainment sector have positioned it in a complex dance of growth and market control, emphasizing that "the concentration of ownership within the sector will inevitably continue."

The Broader Impact of Private Equity in Media and Entertainment

The allure of private equity in media and entertainment extends beyond mere financial investments. The sector offers ripe opportunities for profit through disruption, particularly in today's dynamic media landscape.

According to McKinsey's Global Private Markets Review 2024, private equity's "dry power" for new investments has seen substantial growth, reflecting the sector's robust capital influx. This financial muscle is supported by substantial private wealth, notably from individuals and families, which significantly outstrips the market capitalization of publicly-traded companies globally.

"Our job is to invent on behalf of our customers, and that includes pushing the boundaries of how we think about media and entertainment." Jeff Bezos, Founder of Amazon Prime

The disruption initiated by streaming giants like Netflix and Amazon has permanently altered the content distribution landscape, challenging the traditional dominance of Media Majors. These changes have only accelerated with advancements in technology and shifts in consumer behavior, emphasizing the relevance of digital engagement.

"What we do is we start with the consumer and we work backward. That's how we're disrupting the very nature of how films and television are consumed globally." Reed Hastings, CEO of Netflix

As for direct audience engagement, Endeavor stands out. Led by Ari Emanuel, the firm has strategically focused on sports entertainment, diverging from traditional Hollywood content production. Endeavor's recent decision to go private under the stewardship of Silver Lake underscores a strategic pivot designed to align more closely with content creators and their audiences.

Moreover, the bids by Apollo Global Management, Inc. and Blackstone to take Hipgnosis Song Management private exemplify the strategic acquisitions aimed at harnessing direct-to-consumer channels, which are increasingly vital in the streaming-dominated music industry.

The rise of private equity in media and entertainment is not just a story of financial investment but also a narrative of strategic innovation and adaptability. As digital transformation continues to redefine the sector, private equity is poised to play a pivotal role in fostering media companies that are at the forefront of technological adoption and audience engagement. This transformative approach is not only reshaping how content is produced and consumed but also setting new standards for industry growth and innovation.

The Bright Future of Investments in Feature Films, Immersive Experiences and Live Events

Resurgence of Feature Films

As we look towards the future of entertainment, feature films are poised for a vibrant resurgence. With streaming platforms having saturated the market during the pandemic, a renewed appetite for the cinematic experience is evident. Audiences are seeking more than just content; they desire an event—a return to the spectacle of cinema. Advances in technology, such as high-resolution formats and enhanced sound systems, are drawing crowds back to theatres. This shift presents a lucrative opportunity for investors. Films with global appeal, particularly those featuring diverse casts and international settings, are likely to attract significant box office returns. The resurgence is not just about quantity but quality; blockbuster productions with intricate narratives and state-of-the-art visuals are set to captivate audiences worldwide.

A24 Films, which is known for its innovative and original content, A24 has carved out a niche in the feature film industry by producing and distributing independent films that often become critical and commercial successes. Films like "Moonlight," which won the Oscar for Best Picture, and Lady Bird demonstrate A24’s ability to support unique storytelling that resonates with diverse audiences. A24's strategy of backing distinctive filmmakers and topics not only distinguishes them in the crowded marketplace but also attracts a devoted following, boosting their global appeal and profitability.

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Blumhouse, who specialize in low-budget horror films that consistently yield high box office returns, Blumhouse leverages cost-effective production techniques to maximize profitability. Their model focuses on minimal investment for maximum return, exemplified in successful releases like Get Out and The Purge series. Blumhouse’s approach not only revitalizes the horror genre but also demonstrates the potential for high returns on investment in feature films, making them an appealing option for investors looking for significant impact with controlled risk.

The Rise of Immersive Experiences

Immersive experiences are redefining audience engagement by blending physical and digital realms, creating hyper-realistic environments where participants are not merely observers but active players. These experiences, ranging from virtual reality (VR) concerts to augmented reality (AR) exhibitions, offer a new form of escapism that resonates with a tech-savvy generation. The potential for growth in this sector is immense.

As technology becomes more accessible and affordable, immersive experiences can be scaled globally, offering personalized interactions that traditional entertainment venues cannot match. This sector's appeal lies in its ability to adapt and evolve, making it a hotbed for innovation and a prime focus for forward-looking investors.

"The riskiest thing we can do is just maintain the status quo. We're on a never-ending journey of technological innovation to keep our audiences engaged and coming back." Bob Iger, CEO of The Walt Disney Company

The VOID, focuses on VR-based experiences, The VOID takes users on immersive adventures that combine physical sets and VR technology, creating fully engaging worlds. Their collaborations with major brands like The Walt Disney Company and Marvel Studios for experiences such as Avengers: Damage Control illustrate the potential of immersive technology to transform the entertainment landscape.

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Meow Wolf is an arts and entertainment group that creates large-scale immersive art installations, Meow Wolf designs environments that are interactive and narrative-driven. Their installations, such as the House of Eternal Return in Santa Fe, provide unique, immersive experiences that captivate a broad audience, highlighting the growing interest in this form of entertainment.

Live Events: A Revitalized Draw

The allure of live events remains undiminished! The sector is expected to be at the beginning of its exponential growth curve. The human element — the collective experience of sharing a moment — is irreplaceable and is becoming more valued in our digital age. Festivals, live concerts, and sporting events are seeing record numbers, as audiences crave real-world connections.

Moreover, the integration of digital enhancements, such as live streaming and interactive features, allows these events to reach a global audience, thus maximizing revenue streams beyond physical ticket sales. The trend towards experiential consumption means that live events are no longer just about the show itself but about the entire experience, from premium seating to exclusive backstage access, all of which are ripe for investment.

Live Nation Entertainment is the world's leading live entertainment company, Live Nation has mastered the art of creating memorable live experiences. They have embraced digital enhancements, including VR concerts and live streaming, to extend their reach beyond traditional venues and tap into a global audience.

Whereas AEG Presents, is a top player in the live events industry, AEG Presents operates in all aspects of contemporary live entertainment, including concerts, special events, and festivals like COACHELLA MUSIC FESTIVAL, LLC. They have innovatively integrated digital and interactive elements into their events, enhancing the overall fan experience and expanding their global market presence.

Investment Strategy: Be Bold. Dare To Be Visionary.

For investors looking to capitalize on these trends, the strategy should be bold and visionary. Consider investments that not only entertain but also engage. Feature films that push technological boundaries, immersive experiences that redefine perception, and live events that connect and resonate on a global scale are key areas with promising returns. Partnerships with technology firms to leverage AI, VR, and AR can enhance the appeal and reach of these investments. Additionally, sustainability and social impact are becoming increasingly important to consumers, and integrating these aspects into entertainment offerings can differentiate and add value to investment portfolios.

"As technology advances, it doesn't just affect the economy—it affects our daily lives, including how we entertain ourselves. Those who understand this shift and invest in it wisely will shape the future." Yuval Noah Harari, Historian and Author

The future of entertainment investments is dynamic and filled with opportunity. As investors move away from traditional sectors like real estate, the entertainment industry, particularly in feature films, immersive experiences, and live events, offers a fresh and potentially lucrative frontier. This sector promises not only robust financial returns but also the chance to be at the forefront of cultural and technological innovation. For those willing to embrace these changes, the rewards can be substantial, marking a new era in entertainment that aligns with modern desires and expectations.

If you are an Accredited or Institutional Investor and you would like to review our 2024/2025 Entertainment Portfolio Investments, DM Gregory Gray, CEO & Founder of Summit Communication Group

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