How Endemol May Turn Banijay Into a Global Production Powerhouse

Courtesy of Netflix
Endemol Shine produces Netflix's 'Black Mirror'

The combined firm will have nearly 200 production banners in 23 territories across Europe, the U.S., Asia and now Latin America.

Amid the ongoing consolidation of entertainment and pay TV giants, Banijay Group is shaping up as a true global Goliath.

The French TV production firm already was calling itself "the world's largest independent content creation group for TV and multimedia platforms," making various acquisitions over the years. But on Oct. 26, it unveiled its highest-profile deal yet, buying Endemol Shine from Disney and Apollo Global Management for around $2.2 billion, boosting its scripted credentials and making the Vivendi-backed company the largest TV producer outside the U.S.

The global powerhouse will have nearly 200 production banners in 23 territories across Europe, the U.S., Asia and now — thanks to Endemol — Latin America, and it says that its combined 2019 revenue will reach about $3.3 billion. It will have a catalog of nearly 100,000 hours of content. 

The merger will unite such popular Banijay franchises as Keeping Up With the Kardashians, Survivor, Temptation IslandWife Swap and Versailles with Endemol's unscripted (Big BrotherMasterChef, Deal of No Deal) and scripted (Black Mirror, Peaky Blinders, The Bridge, Broadchurch) hits.

Banijay's management seems to believe that bankers and analysts who have said that in the current environment companies must go big or go home are right. "Combining the resources of these two companies will instantly strengthen our position in the global market, and our capabilities across genres will further define us as a go-to provider of first-class IP worldwide," Banijay CEO Marco Bassetti said in unveiling the deal.

Analysts see room for cost cuts, and layoffs, from merging the firms’ sales and corporate operations. But they also see the chance for the independent producer to feed the huge growing appetite for content of existing and upcoming streaming services, as well as traditional networks and others. 

"In the streaming wars, this bulking up has a rationale," Hal Vogel, CEO of Vogel Capital Management and a former entertainment industry analyst, says. "They can be a ‘substitute arms merchant’ to the other streaming companies as, say, Disney, no longer licenses to Netflix."

Brian Wieser, global president, business intelligence at GroupM, adds: "With the Warner TV studio now a more integrated part of a larger entity, there are probably more opportunities for independent production entities to become networks’ second studio of choice after their own in-house studio, which would be positive for Banijay."

Given the "competition among streaming platforms" and others for subscribers and content, CFRA Research analyst Tuna Amobi says there is also a simple business rationale behind the Banijay-Endemol combination, calling it "a quest for economies of scale within a favorably recalibrated part of the media and entertainment value chain."

Wieser says the Banijay-Endemol marriage makes sense given industry trends, but suggests management and industry watchers will want to keep an eye on how the deal pays off across the various genres the company will be involved in. "Content production is a growing industry because of all of the new sources of demand from around the world," he says. "However, it will be important to monitor whether growth rates will be similar between premium prestige television-related content and reality or other formats."

Debt ratings agency Moody's on Oct. 30 also said that it would review its debt ratings on Banijay for a possible downgrade. "The merger would enable Banijay to reinforce its market positioning in key markets like the U.K. and the U.S. where the company has been historically weaker. The independent status of the new combined group would also facilitate commercial relationships across all content distributors in the market, particularly amongst the fast growing OTT platforms," its analysts wrote in a report. But they also highlighted that, "the combined entity would likely have much higher leverage than Banijay's standalone leverage pre-transaction."

Moody's concluded that its ratings decision will depend on what management of the combined production giant outlines in terms of strategy. Said the debt ratings firm: "Financial policy and the company's deleveraging plans will be a key consideration. ... It will also consider management's strategy and business plan over the next 12-24 months."