Entertainment One specialises in the development, acquisition, production, financing, distribution and sales of entertainment content. Its rights library is valued at US$2.0bn and is exploited across all media formats.
eOne has bought Audio Network for £165m alongside a share placing at 450p raising c £130m. Audio Network’s business model meshes very neatly, adding both music resource and a substantial recurring revenue base while giving the group’s existing artists and catalogue new revenue-generating opportunities. The price represents 15x LTM reported EBITDA and management indicates the deal should be earnings enhancing in FY20. The year-end trading update indicates financial performance in line with expectations, with the groundwork in place for good progress across both Family & Brands and Film, Television & Music. The benefits of the transition towards production in film are clear, with better margin potential, a reduced risk profile and stronger free cash flow. Our forecasts do not yet reflect Audio Network.
SVOD is rapidly gaining share, growing at a reported 20% CAGR. Competition between platforms is driving the requirement for premium content and, despite the proliferation of non-linear distribution channels, there is still a tendency for the audiences to gravitate towards particular hits. This is driving a trend to high production values, with the real underlying competition to grab and maintain audience attention.