How Much for That Reality Company?! What's Behind the Recent Acquisition Spree
This story first appeared in the April 11 issue of The Hollywood Reporter magazine.
SallyAnn Salsano turned spray tans into gold March 26 when European giant FremantleMedia took a 75 percent stake in 495 Productions, her reality TV juggernaut behind Jersey Shore and Party Down South. The deal, which sources value at around $50 million, is the latest in a flurry of recent mergers and acquisitions in the unscripted space.
"Another day, another eight-figure deal," says one British finance specialist of the boom. So far this year, German broadcast giant ProSiebenSat.1 picked up Say Yes to the Dress maker Half Yard Productions for an estimated $50 million; the U.K.'s Tinopolis Group snatched Jane Lipsitz and Dan Cutforth's Magical Elves in a deal said to value the Top Chef shingle at more than $100 million; and ITV took a majority stake in DiGa Vision, the reality and scripted group of former MTV executives Tony DiSanto and Liz Gateley. ITV's swelling stable already includes Gurney Productions (Duck Dynasty), High Noon (Cake Boss) and The Garden (24 Hours in A&E), all of which the U.K. broadcast group has bought in the past two years. Not to be outdone, Warner Bros. Television in February paid $273 million for the international assets of Dutch reality TV specialist Eyeworks (Celebrity Splash!) and Discovery snatched up Brit group Raw TV (Gold Rush).
"The content business in reality TV has never been so rich as it is right now," says Marco Bassetti, CEO of French nonscripted conglomerate Banijay Group, which in 2010 acquired The Real World creator Bunim-Murray Productions and recently kicked off a new drive to buy U.K. and U.S. unscripted shingles. Bassetti points to the booming U.S. cable nets and their hunger for original content as a driver behind the current acquisition boom. "Look at USA, TNT, TBS, AMC -- five years ago they had no unscripted programming on air," notes WME agent Josh Pyatt, who reps top reality talent. "This isn't a bubble; there is more opportunity out there than ever before."
Another factor driving these deals is the digital revolution. Big broadcasters, fearful of new outlets and their original content plans, have determined that it's better to be a producer in addition to a distributor. "They know streaming, cable cutting, the VOD boom could make them irrelevant unless they bring content in-house and own the IP," says one analyst.
But Salsano doesn't own Jersey Shore (MTV does) and Magical Elves doesn't own Top Chef (Bravo); they just produce them. So what are these European companies acquiring? "We are buying into each others' strengths and each others' relationships," Salsano tells THR, noting that the female-skewing demos of her shows fit well with Thom Beers' Original Productions (Ice Road Truckers), which Fremantle bought in 2009. "He's got the guys trucking, grunting and doing their thing, while I've got my girly thing going on." In addition, hitmakers like Salsano often have leverage to carve out lucrative international rights. When Magical Elves brought its latest show, Online Dating Rituals of the American Male, to Bravo, the company was able to keep foreign and sell off rights to the highest bidders. A hookup between a hot U.S. shingle and an operation like Fremantle, ProSieben or ITV can help the latter get a foothold in the U.S. market, access to talent and reliable cash flow while the former gains global resources and access to a huge IP library.
RBC Capital Markets analyst David Bank notes that for publicly traded companies like ITV, ProSieben or Fremantle parent RTL Group, dealmaking in areas where they already are strong is seen as key to growth. And there are few indie scripted players big enough to warrant attention from the big boys. "There aren't a lot of TV content companies of scale outside of the reality segment that are not already part of a bigger group," says Bank.
As long as networks keep ordering reality shows, the M&A spree likely will continue. "Anyone of any size is getting offers right now; it is really snowballing," says one agent. And last week's buyers could be next week's acquisition targets. Predicts a European analyst: "The era of the mega-mergers could be coming."
5 Reality Powers Primed for a Payday.
Hot Snakes Media: The company of husband-and-wife team Eric and Shannon Evangelista has been a takeover target since Breaking Amish and Amish Mafia became mega-hits for TLC and Discovery.
Leftfield Pictures: Brent Montgomery struck gold with History's Pawn Stars, last year bought The Real Housewives of New Jersey shingle Sirens Media and has partnered with Hoarders producer Jodi Flynn on L.A.-based Outpost Entertainment.
Endemol: A sale of the original reality giant is less a question of whether than when. U.S. investors Apollo Media Group, which already controls American Idol owner Core Media and some 30 percent of Endemol, is expected to finalize a deal this year to take majority control of the Dutch producer of Big Brother and Deal or No Deal.
T Group Productions: Jennifer Daly's Santa Monica shingle has delivered hits Storage Hunters, Container Wars and Swamp Hunters, and has a full pipeline including House of Food for MTV and Celebrities Undercover for Oxygen.
All3Media: This 800-pound U.K. gorilla owns 18 production companies and shows such as Kitchen Nightmares and Undercover Boss. Is fellow Brit giant Fremantle a suitor?