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Investing In Nostalgia Or Sharing The Wealth

In business - as well as everything else - all things eventually come to an end. This is not doom and gloom. A favorite brand or product disappearing might well-up sadness and tears but, voila!, there is always something else to replace it. Generations change and bring with them different ways, sometimes better and sometimes just, well, different.

bandstandBut nostalgia is a powerful arbiter of all thing popular. Attraction to sport is highly affected by deep cultural affinity. We like our sports unchanged or, at least, intact. This makes sports attractive to advertisers and marketers - and the TV people who feed on them. Sports marketing is widely seen as resisting most business cycles. It is good to note that jousting was once a popular sport.

Citic Private Equity is reportedly in negotiations to acquire a majority stake in Imagina Media, noted the Financial Times (October 24). Imagina Media is a production house and sports rights broker based in Barcelona, Spain. Citic Private Equity is a subsidiary of State-owned China Citic Bank, 7th largest in china with assets approaching US$ 500 billion.

Deals involving Chinese investors - and rumors thereof - occur with such frequency that reporting produces but minor blips. China Citic Bank was reported to be part of the Chinese consortium that acquired Italian football club AC Milan from Silvio Berlusconi but it seems, reported Il Sole 24 Ore (October 6), new owner Yonghong Li has gone to China Citic Bank for a €420 million loan to close the deal. Citic and Carlyle Group are jointly bidding in the neighborhood of €3 billion for the McDonald’s franchises in China, reported Fortune (September 3).

Not particularly well-known outside of television and sports circles, Imagina Media is jointly owned by Mediapro, advertising and marketing giant WPP, investment house Torreal and Mexican broadcaster Televisa. Nearly all of the company’s revenue - 95%, reported El Mundo (October 27) - is related to Mediapro. Torreal started sniffing around for potential buyers for its 23% stake in September, reported Bloomberg (September 14), that might value Imagina Media in the neighborhood of €2 billion.

MediaPro, holding a 35% stake in Imagina Media, is primarily a production services company significantly involved in TV sports. It also operates Spanish entertainment TV channel LaSexta and several specialist sports channels. Grupo Televisa is a major producer of Latin American TV content, second only to Brazil-based media giant Grupo Globo. Televisa has struggles of its own, recently losing cable distribution for several pay-TV channels in Mexico.

The football business, either a deep well of financial reward or a bubble waiting to burst, is a big revenue producer for Imagina Media, as well as Mediapro, WPP and Televisa. Imagina Media is rights holder and TV producer for the European Grand Prix, the Formula One (F1) automobile racing event that appeared at several venues through 2012. The event exited the Valencia, Spain course after several years and returned this year in Baku, Azerbaijan.

F1 is, arguably, in decline, perhaps along with all auto racing. Sagging TV audiences have been met with the pay-TV or nothing option, also punishing English football viewership. Millennials are watching less traditional TV, any of it; Pokemon Go being their model for sport. The scramble for sponsor revenues further reduces racing teams, Force India and Sauber disappearing. Legacy venues associated with F1’s greatest days - San Marino, Valencia - are quiet. The Malaysian Grand Prix may disappear in 2018.

That is not to suggest at all that decline-phase businesses are unattractive to investors. Once past the sparkle of heady growth, production costs typically drop. Then, too, new markets once deemed too small or remote become quite attractive. Super-investor Warren Buffett acquired small and mid-market US newspapers. Carlos Slim and Bill Gates, who tip back and forth as the world’s richest guys, have invested in the New York Times Company and copper wire fabrication (Carlos) or Canadian National Railways and Coca-Cola (Bill). Both invest significantly in philanthropy.

Another super-investor is John Malone. He is the principal in Liberty Media, which is acquiring controlling interest in Formula 1 for US$4.4 billion. Almost immediately well-regarded 21st Century Fox vice-chairman Chase Carey was named chairman of Formula One Group. Long time F1 CEO Bernie Ecclestone keeps his job, at least until the acquisition closes sometime next year. Auto racing watchers see Liberty Media emphasizing digital opportunities, more US venues and a certain tip to F1’s European legacy.

Another Chinese acquisition of a media company has made bigger headlines and raised the eyes of otherwise distracted US politicians. Dalian Wanda Group is paying US$ 1 billion for legacy Hollywood producer Dick Clark Productions, reported the Wall Street Journal (November 3). Dick Clark Productions produces the Golden Globes, American Music Awards shows and the Miss America pageant. Dalian Wanda Group is owned by Wang Jianlin, China’s richest guy, and already owns the second biggest US movie theater chain AMC. He’s bidding for US theater chain Carmike Cinemas as well as UK chain Odeon. After the Dick Clark Productions deal was first announced, 16 US House of Representatives members asked for investigations into “national security implications.”

 


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