How Hollywood Dealmaker Thomas Dey Views the Streaming Wars

M and A deals across the sector. Um So, just maybe start off by saying, what is the lens through which you look at the industry well as as the listeners can tell from our voice. I starked it in

the UK. UM really the start of the TV production industry if I consider it back in two thousand and three when the Communications Act came in transferring the rights of TV production creations from the broadcast to the actual the producers and the creators, and that was the real start of the industry because these companies became very valuable.

Um So, I think my perspective is really one of spanning sort of two decades, and I've seen the industry morphing and changing from broadcast to cable and now to stream. My first question here is there's been a definitive shift in viewing habits during the coronavirus pandemic um and how media companies are reaching consumers. What what are your thoughts here on how permanent this shift in behaviors and what

are the implications for your business. There couldn't be a more fundamental shift target that has occurred really in the last five years, and the reason for that is that the whole business model itself has shifted. If we think back to free to air linear viewing, people turn on the TV and what's on the TV they watch, and in between the shows there's adverts that are being shown to them, and that is the real generator of cash

for the broadcast. So the relationships actually between the broadcasters stroke network and the advertiser and the actual consumers as a byproduct or actually to product themselves of that exchange because they're watching the adverts. So we've had this very complicated model for fifty seventy years or longer where actually the consumers were a secondary consideration and just by their

volume of numbers they were considered important. Now this has changed completely to the consumers becoming the subscribers and they're directly engaging with the digital platforms to see the kind of content they want to see, and they're controlling what they see and when they steer UM. And this is being distributed now through quite a clever algorithm as opposed to um you know, expensive marketing. So the whole model has changed fundamentally to what I believe to be a

superior product at a lower pricing. Well, it hasn't completely changed. You still have TV networks. They're still large audiences for linear television. There's still players in the game, aren't they. I agree, and I think free to air and broadcast and curated content will always have a place on our schedule. But I think that especially your question earlier about the pandemic, people are talking about what are they watching on the

streaming platforms more than anything else. Right, Yeah, so I can't It's difficult to know where the new sort of cable cutting numbers will will end up, but I think it will be a lot deeper and a lot lower than people think. It's an unstoppable trend, no doubt about it. And you're seeing companies like Disney or Media, NBC Universal in the United States, they're all shifting to point towards this direct model going forward. I mean, they're putting all

of their chips on that piece of felt. I think, yeah, it's very exciting. I mean every week you're seeing a new ark in in in the paper of variety, in magazines talking about the shifts that are occurring. And these shifts are in the institutions that have been around for a hundred years and now they're all changing their platform to really focus on content because the content then feeds

into the digital platform. And we're seeing this right acrost the studios, right across the broadcasts, and right acrost the networks. Talk a little bit, tell us about the deal flow and the piece of the deals that you've had in the last say nine months during this during this lockdown periods, it has it gone up as it stayed the same. You know, we've seen productions halting has had had an effect on the types of deals you're able to do.

I think I think two things. I think one one is that the types of companies that were reliant on large production crews going to far away places. These were the sort of traditional shows that were creating the profits that sold the companies that we are acting for and when COVID hit that, we had about ten deals in progress and eight of them were instantly on hold because the buyers had considerable issues in their own businesses where they were fighting fires and trying to work out what

to do. And meanwhile our clients, the sellers were no longer confident of their pipeline or their production. So it was it was a complete seizing up of the industry UM, and I expected things to completely hold UM And what actually happened is those types of deals did hold. So I was right in that regard. I think where I

was surprised, they were pleasantly surprised. A bunch of other deals didn't move forward, and people shifted their focus, and we shifted our focus to try and find companies that didn't have that lines, so companies that had other ways of growing or other ways of being. Now, let's talk about some of the recent deals that you've been UM advising on. You were you were instrumental as as an

advisor for Charlie Brooker and Annabel Jones, creators of Black Mirror. UM. They did a more deal with Netflix for their new in the production company Broken Bones. This was reported to be a deal worth over a hundred million dollars. I don't know you can comment on that, but what what were the dynamics in that particular that you that you helped them secure. Of course, to the terms of the deals are confidential, but what I can told about is that that type of deal was exactly the kind of

deal I'm talking about. Charlie Brooker and a Bell Jines are the creators of Black Mirror. They did so at their previous company that was an in them all um, and Netflix was looking for a relationship with them and looking for a way to create compelling content. So this was a deal that was not reliant on huge teams

of people and the historic performance. Who was very much a deal looking forward and working with two of the most count of people in the industry and a ready marrying them up with one of the most exciting digital platforms. So this is all about growing a business, going forward

and creating more content, you know, like the black enfranchises. Now, once you seem kind of water finding and it's its own level, let's say, and you've got whatever it is, h five or seven or ten global streaming services, I mean, are we going to see a pullback on you know, these kinds of pretty large overall deals with creators or is the competition just going to get fiercer for this

kind of talent. I mean, I think that Netflix is one of the earlier initiatives of these types of deals, and they've been the most active in the sort of earliest time period, and some people would say they have overpaid. I don't know. I mean, with all of these things, I think people are often accused, including the networks and broadcasters that we've sold over a hundred companies too. They

always talk about are they overpaying? And I think the the question is are there companies that aren't doing enough to meet the new challenges that are And if you don't do enough, what is the price of that? Because I think, you know, capturing the top talent in the market is always going to be um, you know, a sure way of guaranteeing your future, whereas being you know, maybe more conservative with your investment means you might not

be here. And I think, you know, so we've got to look at these shows and recognize that with a piece of paper and a pen, these writers can create billion dollar franchises. So it's really hard how to to assess how much to pay up front to gain that

kind of watching. We were speaking a little bit earlier, and I don't know bridging your mouth, but you were saying that it's, um, it's become uh the case that where you have a more agile type of production, one that doesn't require a lot of infrastructure, that those deals have been um been more fruitful in getting that you mentioned. I think the Bear Grills UH deal with with Bana J tell us a little bit about what that was,

what that involved, and why that happened at this particular time. Sure, I mean, I think the deal with Bear and Bandage closed slightly prior to COVID impact, but I think it's a very good example. Certainly, I know you still working with them and content that they've been doing very well going forward because there's a very small production team that is being dropped by helicopter into the Amazon with some fortunate or unfortunate leader of the country who then survives

with them for ex period of time. So this is very much a sort of small group of people that can create some quite exciting content without having huge crews necessarily interacting with each other. So I think that the Natural Studios, which is what the opportunity was called was about creating global content and really encouraging outdoor activity and entertainment across the world. And man j has got a

very huge network production companies in each territory. So it was a good marriage and it was a good idea. I should note before I forget that you've been recognized in Varieties Dealmakers Impact Report for the last seven years and I just wanted to mention that. But on the topic of UM, you know, industry consolidation. Obviously we've seen in Disney buying the bulk of century backs. UM you're seeing,

you know, those those types of UM massive deals. Does that does that put the brakes on M and A in the industry or does it accelerate, you know, the scrambled for positioning by other players. I think if you look at the last kind of ten fifteen years UM, there was there was a steady growth of channels, there was a steady growth of cable, there was a high

viewing interaction. But content became dispersed across many channels and as a result, the the broadcasts and the networks became very risk adverse, spending huge amounts of money on expensive script and shows that after episode two could be canned, So really that was the birth of the reality TV and the sort of local lost higher volume viewing UM.

And as the advertising revenues kind of went down as the viewers went down, this pressure but more and more pressure on the broadcast network and there was a downward spiral where their budgets went down and their viewing figures went down. So sixteen, seventeen and eighteen were not good

years for anyone in the industry. Um, you bring into eight twenty in the streaming platforms which have been preparing for their debutant outing suddenly come into the market and start spreading the kind of money we haven't seen for a decade. UM. It's completely changing the industry to brought back scripted, high end content from people like Left Bank

who produced The Crown, right across the board UM. And I think I think the industry has actually allowed more and more of that money to pour into the hands of the creator is the onscreen town and the writers. So I to see a very vibrant next five to ten years as people via for those people's um sort of attension and relationships, and I don't see any shortage

of cash coming space. I do think that if you're going to compete in this territory, you have to have access to huge budgets or really niche content, So you've become a specialist in an ultra sort of niche aspect of the content, otherwise that people in the middle will just be sucked up. We've been talking about new productions mainly, but let me ask you just a bit about the value of library content. Um are you seeing that increase or these sort of libraries of bankable you know, popular

titles or maybe even long tail titles. Is that the kind of thing that has increased in value given the race to director conterior streaming, Yes, exactly. I mean I think if you look at the music industry, it seems to be about ten years ahead of the content industry. And when the music industry went online, initially there was a complete tale of the record sales and everybody bemoaned the loss of the whole industry, and actually they said

the only thing that was happening was live events. And then the streamers came on board, you know, with with Spotify and Amazon Music and all these companies, and they took the pricing point of music down to a point where everyone went, you know what, I don't mind this. I'm willing to pay eight dollars a month ten dollars a month to listen to anything I want to listen to at any point. And what that did was create

nostalgic listening. So you and I initially listened to all the funky news stuff, and very quickly we started going back to the seventies, eighties and nineties and listening to things that we haven't even thought of listening to. So all these music library is weren't from value less to generating income, and a lot of people must have got shocks where they suddenly started getting these big royalty checks.

I think the same thing happened with libraries that for a while they were mismanaged and left in small businesses that couldn't distribute them very effectively, so they were often assets sitting in the wrong hands, in the wrong country and people couldn't actually access. And I think now, through the ease of the digital platforms, these films are now

becoming absolutely valuable. So we're seeing them and shoot up in value, and we're seeing a lot of people let go of them and allow them to be arriving at the home. In the commodities now pulling back just a little bit here in the seismic shifts in the industry that we've been talking about, who are the winners, Who are the losers? That's a big question, um. I mean, I think with I think it's the players in the middle.

I think that, um, I think that people whose supply sort of okay services to a small group of people who will get washed away. And I think there's going to be very dominant, very big players that will have largely global networks that can be more efficient to reach more corners. And then I think there will be ultra niche providers of content to specialize in narrow areas that are hard to get, and I think everyone in between will be sucked up to go out of business, will

be sucked up in some bigger entities. So those are potential acquisition targets. You had mentioned before that that your belief is that even with this uh you know, stampede towards streaming, there's still going to be a need to monetize these entertainment properties off platform. What do you mean for that, and what are the implications, um, you know, for theatrical exhibition, given that we're still all in large parts of the world under lockdowns and theaters are not

an open mind. Yeah, I mean, I think what's happening is as the streaming platforms are launching and competing with each other, there is an acceptance that they have to consider off platform monetization and what that means is it's not just feeding it to the subscribers, but it's actually

looking for other ways to monetize that intellectual property. And as we've seen across the board, interntional property can be turned, as you said, into the article, that can be turned into live performances, that can be turned into immersive theater. It can be books that can be merchandizing. There can be so many sort of extensions from intellectual property. But it's just a fact that like the big studios before them,

they will slowly increase their their efforts to monetize. And one of the as we talk about is whether they're going to actually end up having a distributional because a lot of the digital platforms affected in the countries that have the infrastructure. There's lots of countries that don't have the infrastructure. So they're actually talking about will they go sort of downstream and start having a distribution on or even at broadcast style that will see the broadcast to

those terrace ms. One other question on industry trends. Do you see, you know, this coupling of UM telecommunications and media, is that a model that's going to survive? You know, podcast with NBCU and now Sky and a T and T with direct TV and Warner Media. Are those vertical integrations advantageous to those companies through to those some have become a liability. Well, I'm completely biased with my answer, but I do believe it's got a small amount of

actual grounding. UM. I think that the technology platforms are becoming a homogeneous and a little bit like you lay the cabling, and you know, once you've laid the cabling, what do you put down it? I think that's the issue that both technology and telecomspects, which is, you know, you can come up with a smarter piece of technology that slightly improves the quality of telecoms, but what do you Why are people coming to you? What is the

originality between the different providers? As the service becomes more and more homogeneous between the groups, the one thing that distinguishes them is access to what comes down those pipes, what gets them to you? And I think content is something that everybody identifies with. It's quite funny when you talk to someone you know about a bioscience business or about even automotive, unless they're really enthusiasts, you can lose

them with in three months. But if you talk to some about coming own and switching on the TV and watching a stream or watching a broadcaster. Everyone has a personal view as long as a business view. Um. And I think that in this world, content is just critical. People talk about it. It's the new politics. It's acceptable to talk about your favorite show of the dinner policy. Try talking about politics now well. UM. And in this new world, data obviously has become a big piece. You know,

it's it's kind of a crown jewel. And you know that's why you're seeing companies wanting to own that first party data. Um does this this? Doesn't that put more leverage on the side of the content buyer as opposed to the content seller. That's interesting. I was planning on going on holiday and they said you have to have a COVID test and in the small print it said

they own your DNA information. And I was quite alarmed by that, as that could be a According to you, our horari that that would be the next bit of data we're giving away with content. I think your question is probably aimed at the US, where the buyers or the commissioners of the content usually end up owning the intellectual property. In other countries in the world, it can

be the creators that end up owning intellectual property. And what we've seen in a very competitive environment is that as you the creator can negotiate with more than one party, you can start having quasi ownership rights and that could be having points on the back end, that could be having a lifetime right to produce it, and it can even be a share of income from the content. So I agree with you. I think that in this country there is definitely a vault of content that is created

by the by has. But I still think that new content pips the day in terms of attractive audiences. It's about that renewal, is yeah. Right. Um, so a c F does have a global per view. You're you're relatively small investment bank, but you're you've got transatlantic operations here. Um, are we seeing deals more global in nature now that you have h companies that do span global global operations? And does that does that change the nature of um

of how those deals are done. Okay, that's a good question. I mean we we kind of operate in space of about fifty million dollar deals going up to that two billion dollar deals, and most of the investment banks who operating in space do not have the transatlantic footprint. You don't have a global from footprint. But I've actually found that a significant number of ideals involved parties selling from UK Europe into the US and people from the US

selling into Europe UK. It just seems to be a lot of transatlantic interest, both in terms of the style of content and the wish to access the sort of consumer or the subscribers. So I think we are unique in that regard that we maintain that global presence that can service deals of that songs. Why do you think there is that interest in getting foreign product, if you will, to a domestic audience. Well, I definitely know that in the UK and in Europe. The idea is that the

budgets in the US are just significantly high. Um So there is a lot of golden eyed sort of envy that they're going to If you want to make a lot of money, you have to come to the US and be able to access those budgets at the same time is extreme only hard to do that from the UK, you know, because you have to set up a team, you have to access to the market. The US market, they certainly welcome Europeans into their content world, which you need to have a base here and you need to

be accessible. And then I think for the US, because they have such a strong dominance in the content space, they like the uniqueness and the sort of idea generation that comes out of the UK or Europe. I mean, God Mora is a good example of a show that was in Italian and had subtitles. It totally increased the interest in the Italian based content. And and just to tell our listeners, that deal involved to Go More sold to Sorry Go Mora was produced by Catalet who sold

to my TV, and it has done very well. I think, I think it has and we've recently a deal with the Spanish speaking great called the Immigrant, who we helped launch their product I think last year. Yeah, it's interesting, I mean, I think you you had pointed out that that foreign language content it's really been this second tier creature for the last couple of decades, and now you're seeing a lot more interest in that um from across the landscape. Correct, and what I'll say, I'll slit you

just bet. I don't want it to be viewed as second tier content. What I'll say is that the English speaking broadcasters put it into a chair or two interest um because they found that it was too hard to do and they were worried about consumers being able to enjoy it. And what happened in the last thirty six months is again, I think it's the idea of this spressions that you see that you see the content put together in a different way, with a different vibe and

a different energy, and people are firing. That refreshing because I think this is one of the by products of streaming and whatch and binge watching. So previously, with network and broadcams, we had to wait once a week to watch our favorite show, and the formula in the show was not necessarily visible. Bad guy comes in and going to do something bad, scared, everyone fails, but then manages to do it, but then the good guy stops him

at the end. That's what we watched once a week, and we found the formula refreshing because we could watch it time and time again. It was familiar. When you watch seven of them back to back over three hours, the formula becomes very appound and we start going, Okay, when's the good guy going to get the upper hand again? And then he's going to lose it again and needs it. So, actually, I think consumers have become much more aware of that

formula much. It's much more visible. So when you get a foreign speaking content with a different formula, it's just enough to throw people and keep them much more interesting. Yeah, that's an interesting point. Um, back to this this question. Uh, you know there's so much money being spent on original content and to some ce library content to feed the streaming services as everyone's trying to get an edge and capture their their customers, and people have been complaining about

the blood of content that's out there. There's just thousands and thousands of hours. Um. Do you see that as potentially depressing new productions going forward? Or is or is this appetite for original content going to continue innovated? Well, I'd suggest after COVID that we've all searched high and loads through each streaming service and heap of content, and then because productions have haven't been aver to really happen.

I'd say right now, they're streaming out for even more content. Content. I mean, I think there's always nostalgic watching, but I think the people are viewing their annual subscription going out the door. If they're not getting a good dollop of kind of new content that's exciting and any of it, I think they will challenge them. You know, we've been debating in the industry how many services the average family will have, and you know, we're kind of thinking that

it will be three, maybe four. And if you agree that Netflix and Amazon and Disney, you know, kind of three of the main ones, there's kind of a space for like plus one. So there's going to be a fierce competition to fill that slot. And if you don't feel the slot, you know it's it's it's enough that you feel it once customers have to come back and watch it again and again and again and not turn it off because that that you know, they're not giving

you two year kind of contracts. Back to the question of doing deals in a distributive remote situation like we're in today, how has that changed the as yea, And do you think we'll ever go back to these in person negotiations as the primary meeting for MAT. It's interesting because if you speak to people who are fortunate not to have lost anyone to Covid or suffered any serious

business home from Covida business being shut down. I think a lot of people have found this period, this last eight months ten months to have a lot of advantages and not just disadvantages. And we've set and seen the ability to you know, face to face zooms and meet people around the world without having to fly there to be immensely efficient. And all data is digital nowadays, so there's no need to sit in the room, there's no need to share a physical contract when you can do

it all over emails. So I think we almost were being nostalgic up until two thousand and nine team and there was a considered a courtesy that you would meet people face, play shake hands and somehow the firmness of the hand shape would tell you whether they were truthful or not. I think that's all been blown away now, so I think the efficiency of this has already been proson and is factor that lots of business is finding

more efficient. I think the flip side is when I heard today that there is a potential vaccine and it's nine percent effective. You know, you immediately as a human being in a joyous feeling of freedom and adventure. And I think that will come back much quicker than people expect. When your competitor actually flies over and meets them and you don't, I think that would be the point where you get back on the plane say it's time to do it again. But I'd like to think that we

can at least cut down the extrabits. And you know, this is this incessant traveling around the world to end of this market, you know, incessence of traveling backwards and forwards, east coast, west coast. I'm hoping that can all reduce. But I think there'll always be a place for face to face and human content now times you mentioned that a couple of the pending deals that you've been working

on and then have been tabled. Um, what are what's getting the most attention at this moment, and then looking ahead to one, what do you see happening as hopefully restrictions start to ease up. I think at the moment, we've seen that scripted continent has led away for the last couple of years, certainly double digit and higher multiples are being paid for scripted companies. They can create compelling shows that you know, keep the whole TV department relevant.

And I think that's been a consistency of the last three four years. What I've seen in the last twelve months, maybe eighteen months, is a move into premium unscripted UM and I think that there has been a great interest in having high quality unscripted programs. We did a deal with plincel I Share and it is attracted interest from all over the globe and you know, they do very high end unscripted content UM and I think that that to me indicated that the key word here is premium.

And if you think what premium means, it means content with the brand, content with identity. And I think that in the world of global streaming, when you're being given a whole bucket of content, the thing that stands out is things that have identity with you. And the things that stand out are things that people have either told you about, you've heard about before, or you know some of the people attached and that's how you choose your content.

I doubt many of us take on the storyline and say, oh, it's about a little boy growing up in South Africa and he grows a business and becomes maybe I'll watch that. We commediately to see what is it grand that's on the screen that we can easily identify it. So what we're going to see going forward is that high end, branded, recognized content, maybe a recognized director in the film, a recognized actual the screen, or a recognized series that we've

enjoyed before. What do you think the impetus behind unscripted it's been I think it's this Bins watching. I think after you've and I think it's the formulas that people are using when scripted that after you've watched your tenth Game of Thrones series, you start seeing the high end, glossy scripted content and you just don't want that formula for a while. You want to try something different, and I certainly as a viewer, have done that and you

start looking at documentaries, you start looking at biographies. You kind of move away from that kind of drama and action when you start looking for something else. So I think it's a consumer driven push. I mean, it must be said. It's more cost effective on per hour of production, isn't it. I mean it depends, actually, I mean if you get into some of the natural history programs that take five years of a guyline on top of an

iceberg with a camera to get can get expensive. But yeah, I mean, I think there's a I think there is a lower pricing point, but the quality of the unscripted now is so high that it's not that much. Okay, Thomas, any last thoughts on what we can expect to see in the in the coming year in terms of M and A and the media and entertainment sector. Yes, certainly. I mean, I think for me, the thing that's interesting is when you look at this industry like we have

over a twenty year time period. You know, we've seen genres come in and out of vogue, and if you remember, and if we push our minds back, you know, for a while it was the soap opera. Then we went into the shiny floor game shows. Then we went into scripted and everyone said it was too spensive, so that we came out. And then we went into unscripted cute reality shows. And now we've gone heavily into scripted and

our premium unscripted. My sort of guest is that the next area is going to be in comedy and game show again. I think it's going to be the rise of you know, these kind of game shows that we used to see ten plus years ago. Um So, I think the other thing is the non English and content is going to continue to be of an interest. Well, thank you very much, timas Day of SCF and dost Think, thank you so much. Thank you, thanks for listening. Be

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