Candle Media’s strategy is crumbling as we speak and it is shocking and unexplainable given how many intelligent people who knows the ins and outs of content are involved.
Think of Candle Media as the sun. A multibillion dollar backed entity that came onto the scene in 2021 to buy production companies and content in the name of brand building and supplying content.
Orbiting the sun are two planets.
BlackRock is a multi-trillion-dollar asset controlling entity. They have their hands in every important player and company in the world. They are highly selective about the people they put their money behind and they don’t back losers. They provided much of the funds to bring Candle Media into existence. They are also publicly held. (side note: there are possibly two other funds who invested in Candle Media: Ares and HPS).
Kevin Mayer and Tom Staggs. Co-founders of Candle Media. Both are Disney lifers with impressive backgrounds and experience who rose through the ranks. Mayer launched Disney+ and was instrumental in the acquisitions of Marvel, Pixar, Fox Studios, and Lucasfilm. The man knows about delivering content so much so that he is still on the Disney payroll as Iger’s strategic adviser. Staggs was the Chairman of Parks, Experiences and Products and then the CFO. Also, a smart guy on the business side, he consults Iger as well. Per an article in the Wrap by Sharon Waxman in 2019, neither man is known for their creative intelligence. They are numbers guys and they know the streaming/distribution/brand landscape more than just about anyone else in the business.
Put all of these smart numbers guys with billions of dollars together and surely the first big moves right out of the gate and immediate PR announcements would be a series of purchases of established brands that generate the kind of cash flow that can offset the riskier low revenue growth company acquisitions that are not over-reliant on smooth sailing and could be neutralized by union strikes and otherwise. It’s business 101.
Instead, Candle Media did the exact opposite. They led off the PR game by negotiating against themselves and wildly overpaying for an early-stage not even close to global company called Hello Sunshine (co-founded by Reese Witherspoon) with not a lot of cash flow, no ownership of IP (it did have a book club), and a brand that wasn’t bulletproof. Price paid? Enough for Hello Sunshine to have a reported valuation of $900 million (other reports say $500million worth of Blackstone equity was put into the pot, but we’ll never know what the exact number was because Candle Media is a privately held company).
To this day, when asked, Mayer insists it was a good long-term acquisition (even though we don’t believe that he believes that). The evidence clearly shows that the acquisition wasn’t and isn’t and won’t be justifiable because the company does not have enough money-making ancillaries to weather any particular storm.
Ok, then. Question: how did Candle Media and Hello Sunshine come together aka what was the negotiation process between Candle Media and Hello Sunshine that ended in such a high investment/valuation? Kevin Mayer has curiously never been asked. Were other companies in the mix to buy Hello Sunshine? Apple dipped in their toe according to Hello Sunshine’s CEO Sarah Harden (formerly CEO of Otter Media which owned Hello Sunshine before Candle Media bought them) on CNBC the morning after the announcement…but, we do not buy this claim. First, Apple is not in the business of buying companies like Hello Sunshine. Apple acquires companies involved with technology and software and content and anything else that fuels the products they make. Second, Apple wasn’t mentioned in any other media outlet or by Kevin Mayer, so we will assume it was just Candle Media as the lone interested party…which makes Sarah Harden’s claim a curious one.
Next question: Who did Candle Media negotiate with? Was CAA involved in any way because they rep Reese Witherspoon and former CAA agent Jim Toth who was also an equity partner? Was it with AT&T who bought Otter Media who initially funded Hello Sunshine? Was it WarnerMedia who oversaw Otter Media for AT&T? Was it several of these entities working together to negotiate with Candle Media? It’s strange that the selling entity has never been mentioned given how large the deal was.
Why are we drilling down so deep into this Hello Sunshine situation? Because it has to be asked whether Candle Media negotiated against itself and overpaid by design. Sounds crazy, but consider their other questionable acquisitions/investments to date…
Candle Media curiously bought a 10% stake in CAA-repped Overbrook Entertainment when Will Smith was on the back nine of his career and his company didn’t own any IP or film rights or otherwise. What did it cost for the 10%? Why not a higher percentage? What’s the valuation of Overbrook as a result (99% of the time, the announcement tells us. Why not here as well?). On a related note: 10% is a very interesting percentage in the agency commission world (we’ll get to that below)…not to mention Candle Media is not in the 10% ownership business. They are in the ‘buy the whole enchilada’ business. This transaction made zero sense then and negative sense now. It feels like there was something else going on there.
Candle Media also spent at least $100 million (and it could be $150 million if certain targets are hit) acquiring ATTN (social change content provider) which was a content provider funded by TPG/Evolution Media Capital/CAA. ATTN: wasn’t profitable as of five years ago and while it’s a nice story about a socially conscious company done good, where does ATTN: fit into everything else that Candle Media does? Moonbug doesn’t need it. Does Hello Sunshine? Was there any interest in synergy? Who knows?
Candle Media’s arguably smartest buy (but again at too high a valuation) is the only one that sort of makes sense. Moonbug has tons of ways to make money. Tons of Youtube channels and subscribers. Checks all the investment boxes…BUT, setting this aside…
It just seems like money has flowed directly or indirectly in a certain direction thanks to indefensible deals and it begs the two-part question: What’s this all about and why if the acquisitions aren’t logical? Maybe, it’s about increasing the valuation and/or lining the pockets of entities who benefitted directly or indirectly from the buyout/investment action? Is something about Hello Sunshine benefitting the entities getting paid not just for the specific deal but for something else unrelated to the subject of the deal in some way? It’s strange. It’s hard for Not Deadline to explain…but, there’s something interesting here (that 10% of Overbrook deal sort of dangles in the wind). An entire article can be written about deals made for one thing that are not just about that deal, but for other things as well…we might do that for fun.
Quickly, what if we go the other way? What if the truth is that Candle Media paid low nine figures or high eight figures for Hello Sunshine and simply padded the value with a publicly announced value that wasn’t real? This would be a smokescreen to inflate the valuation of certain companies who benefit from the sale. Why inflate valuation? Maybe, it again benefits the companies when they are in turn negotiating with other companies interested in buying a piece of them? It sort of becomes this weird circular cycle of peacocks strutting their feathers to make themselves more attractive to other peacocks who want to spend money.
Lastly, everyone would ask: Why would Candle Media do this? What’s in it for them? Obviously, money, but from where? Unclear. They have untold billions of dollars behind them. They have three different equity funds to choose from. They have relationships all over the place and probably do all sorts of stuff that is never announced nor will it ever be known because they are privately held. Maybe, they move money from one company to the other, almost like a messenger. We may never know unless a nugget of gold rises to the surface from the muck over the coming months and years. Let’s see…
Sure, critics of this article can toss out phrases like “conspiracy theorist nutjob” and “wears a tinfoil hat” and “wild speculator”, but there is no disputing that Candle Media’s rationale for the companies they bought and the prices they paid are indefensible no matter how good or bad the economic times were…which means that any and all speculation is fair game. What is said versus what actually happened does not reconcile at all.
Which brings us back to Candle Media’s crumbling empire. It has been swift and unrelenting and no one is posing alternative reasons beyond what we hear on the surface…so, Not Deadline has. Why not?
If anyone reading this article disagrees wholeheartedly with the thesis, then come up with something more plausible and write about it…but, please don’t tell us the tale about a bunch of really smart guys who made a bunch of really dumb short sighted decisions. Even Kevin Mayer would find that naïve.