Wall Street Hits the Croisette: Why Private Equity Investors Are Bullish on Indie Film

Wall Street appears to have gone Hollywood. Private equity, or PE, firms are pumping money into the entertainment content, financing independent production and snatching up companies at a level never seen before in the indie industry.

Headline deals, like Tom Staggs and Kevin Mayer’s Candle Media (backed by private equity giant Blackstone Group) buying Reese Witherspoon’s Hello Sunshine shingle for a reported $900 million, comedian Kevin Hart launching new media company Hartbeat with $100 million in backing from PE group Abry Partners, a PE-backed investment group paying $4 billion-plus to acquire TV giant Banijay (Survivor, Peaky Blinders) or RedBird Capital taking a stake in LeBron James’ media outfit SpringHill, point to a broader trend of so-called “smart money” placing its bets on content.

Some of the biggest players packaging projects and inking deals on the Croisette have backing from private equity groups, including European mini-majors Leonine and Mediawan — both bankrolled by KKR — or Anton, the Anglo-French producer/financier/sales outfit run by Sebastien Raybaud, which has tapped private equity to help fund such productions as Gerard Butler actioner Greenland and such Cannes market projects as Canary Black — a spy thriller from Taken director Pierre Morel starring Kate Beckinsale — and Femmes, an LGBTQ+ revenge thriller featuring George MacKay and Nathan Stewart-Jarrett. And the teams from Vine Alternative Investments portfolio companies Village Roadshow, EuropaCorp and Lakeshore Entertainment are sharing a tent in Cannes.

“For the first time we have a great wave of really smart money, private equity money, in Europe,” says Anton CEO Raybaud. “It’s a testimony to the growth in the industry, the growth in consumption, the growth in appetite we’re seeing for all types of films, both art house and commercial.”

Cannes is about to get even closer to PE. Iris Knobloch, who will succeed Pierre Lescure as Cannes Film Festival President in 2023 (becoming the first woman ever to hold the job), is also head of I2PO, a private equity-backed group set up last year for the purpose of acquiring entertainment companies across Europe.

The bet PE investors are making is that the explosive growth in streaming services will lead to a similar demand boom for content. And that the companies that own the IP, the original films and TV shows the streamers need, will be best positioned to benefit. Many see particularly strong growth potential in Europe, where European Union (EU) content quotas for SVOD platforms — 30 percent of all content on streaming services in Europe must be European-made —has created guaranteed demand for original, home-grown films and series which most streamers will be unable to fill on their own.

“We are just beginning to see the impact of the EU quotas,” says Raybaud. “With the number of SVOD subscribers in Europe still growing and more SVOD players entering the market, the opportunities for indie studios, based in Europe with access to original IP and PE capital, has never been greater.”

Instead of inking an exclusive output deal with a single streamer — as Steven Spielberg’s Amblin Partners, Spike Lee’s 40 Acres and a Mule Filmworks, and Vanessa Kirby’s Aluna Entertainment have done with Netflix — many creatives are now using private equity’s backing to stay independent and sell their wares to the highest bidder.

“In the current market, there’s a huge advantage to staying agnostic in terms of who you bring your projects to,” Thomas Benski, co-founder of Pulse Films (Pig, Mogul Mowgli), told THR in Cannes.

Benski is looking to tap PE sources to help director Yann Demange (’71, White Boy Rick) develop and finance content for his Wayward shingle, which will roll out multiple film and TV projects later this year.

Even flush with all their new PE cash, however, the indies remain dependent on the global streamers for distribution. And, as one high-level U.S. studio exec noted, “it’s never been possible to scale a content business if you don’t own your distribution.” If streamers move away from licensing films and shows from third parties in favor of producing the bulk of their content in-house, or if the influx of new capital inflates the cost of production beyond profitability, the current growth market for indies, and their appeal as private equity investments, could vanish.

“We are already seeing this inflation of talent costs, of cost for studio space, for crews, everything,” admits Raybaud. “But the market is now bigger and growing, so I don’t see that as a block for growth. … Private equity will continue to come into the business. You’ll see some great deals and some stupid deals, but the overall direction of the market is positive.”

Georg Szalai contributed to this report.