The asset management game is all about Assets Under Management (“AUM”). The entertainment game is all about “IP”. By the way, Bob Iger likes Bond.
Asset Management & Entertainment Share a Hunger for Assets
Over the past decade asset managers have shifted away from active management and alpha generation in favor of index funds and ETFs. AUM and the ability to gather assets is what matters most in a passive investment game. Front-end investment processes carry zero value. Gone are the days of fat fees and rich portfolio manager compensation. Who needs portfolio managers when your product portfolio consists entirely of index funds and ETFs?
The entertainment industry has undergone a similar change in recent years. Gone are the days of creativity – of independent film (active managers in our analogy). Original content creation has largely been replaced by bringing existing properties – mostly comic books – to screens big and small with budgets that often exceed $200 million. Translation, the entertainment industry is a mass eyeball game dominated by large platform companies such as Disney, Netflix (although we believe NFLX will be relegated to a “prestige play”) and perhaps one or two others (Amazon, Apple) who can afford to produce AND distribute content with global appeal. Such properties are limited with Disney owning the most assets with the likes of legacy Disney, Pixar, Marvel, lucasfilm and Fox.
Is Bond/MGM Next?
The James Bond franchise (co-owned by Danjaq and MGM) has been the subject of acquisition rumors for the past several years as Disney, AT&T, Netflix, Amazon and Apple jockeyed for position. Bob Iger recently added grist to the acquisition rumor mill when he stated he prefers Bond to Middle-earth and Hogwarts. Mr. Iger understands the importance of gathering “IP” as quickly as possible to feed the DisneyPlus direct-to-consumer beast. At this point it would seem that the only way to build a content portfolio comparable to Disney’s would be to acquire Disney. Prospective acquirers are limited.