Kevin Mayer shrugged off the “valuation haters” and offered insights into the big-ticket investment strategy behind his fast-growing entertainment startup Candle Media Wednesday during an appearance at the APOS media summit in Singapore.
“We did not overpay for Hello Sunshine,” Mayer said flatly, defending his company, which he co-heads with Tom Staggs, from one persistent criticism. Hello Sunshine, founded by Reese Witherspoon and bought by Candle Media last year for about $900 million, “will be a big winner,” Mayer insisted, while laying out how the acquisition fits into his company’s broader strategy. Candle Media’s vision, he noted, is the product of his experience at — or near — the top of both Disney and TikTok.
At Disney, Mayer’s last major assignment was oversite of the development and launch of Disney+, the company’s vertically integrated direct-to-consumer platform. As other major entertainment platforms followed Disney’s leading in pulling their content back into “walled gardens,” Mayer says he realized the value of high-end content created by independent studios willing to sell it would only soar — and becoming just such a purveyor would be a pillar of Candle’s approach.
During his brief tenure as CEO of TikTok, Mayer picked up an insight that would serve as another strategic rationale for Candle’s approach. He said he was astounded by the amount of commerce happening on TikTok’s parallel Chinese service Douyin, primarily over live-streaming and asynchronous e-commerce opportunities. “Why was that happening? Because the dynamics and the trust and the energy that is created between a brand or influencer and their followers is quite remarkably strong, especially if it’s a very authentic connection,” he explained. “Within that dynamic, it’s very easy to sell products and very easy to conclude e-commerce transactions — and that’s going to happen more in the West.”
Mayer said Hello Sunshine had the three key pieces he and Staggs look for when targeting acquisitions: a well-defined audience with a strong social media presence (Reese Witherspoon, plus a mission of content created for women, by women), the opportunity to create premium film and television to take into the marketplace, plus underlying e-commerce potential.
As an example, Mayer cited the Hello Sunshine home improvement show Get Organized With The Home Edit, which streams on Netflix but began as a book and line of home organization products — but now boasts a whole suite of branded merchandise available at the Container Store. “So, we have a big social media presence with the founders of The Home Edit and Reese Witherspoon, traditional film and television with the Netflix show, and now the underlying commerce,” Mayer said. “So that’s a really great flywheel.”
Mayer said a similar rationale undergirded Candle Media’s $3 billion acquisition of kids entertainment company Moonbug Animation, home to the CoComelon franchise, which counts YouTube’s second-largest subscriber count (140 million), has spawned a wildly popular Netflix series, and “licensing and merchandising opportunities that are incredible.”
When pressed about how Candle Media values its takeover targets and the conspicuously high prices it has paid, Mayer said: “You have to look at the cash generation potential under your ownership, and it should be worth more under your ownership than on a standalone basis.”
“There are always valuation haters,” he added, noting that many analysts and investors initially scoffed at Disney’s $7.4 billion deal for Pixar and $4 billion takeover of Marvel.
Much as Disney did with those acquisitions, Mayer said he aspires to give the creators behind the content companies he buys the freedom and space to create freely, while centralizing their infrastructure and monetization operations under Candle Media. “That gives us more marketplace presence with the buyers — Netflix or Amazon Prime or Apple TV. … We go to these buyers with a portfolio of things to buy, and that creates a great dynamic in the marketplace.”
As Candle looks to its next acquisitions, Mayer said he believes “Asia is going to be a very fertile place for us to buy assets.” He said he and his partners are looking for media, tech and entertainment firms that have “that flywheel” capacity, “and Asia is a place where we think there’s great potential for that, especially if you think about the commerce and social media dynamic.”
Mayer also said he wasn’t troubled by the 2022’s “great Netflix correction” and the threat it might arguably pose to Candle Media’s strategy pillar of producing film and TV content to sell to streamers for top dollar. “Even with the Netflix stumble — and I think that’s been overstated, somewhat — it is still growing. And even if [Netflix] weren’t growing, there’s I don’t know how many tens of billions of dollars being spent on content purchases, and investments being made by the streaming services around the world. Candle Media is still pretty small in comparison, so we have a huge runway for growth being an independent content supplier of premium television content.”
