Equity investment deepens company's focus on Asia

Peter Chernin is building a very different kind of media conglom than the one he ran for Rupert Murdoch for many years.

 

On the heels of receiving a $200 million infusion from Providence Equity Partners and other investors, Chernin Group is on a path to grow its footprint, but the shape that Chernin Group will take is anybody’s guess.

 

“In the incredibly changing landscape in terms of where media and entertainment industries are going, it’s increasingly challenging for incumbents to innovate,” Chernin Group prexy Jesse Jacobs told Variety. “Untethered from the legacy businesses, you can operate independently and take advantage of the high-growth trends out there to build things.”

 

Chernin Group will step up the level of investments it has made both here in the U.S. and across Asia, a region of particular interest to the company. Some of the new funds will be funneled into stakes in international firms like Endemol India while the outlook continues for opportunities Stateside, where current investments include digital upstarts Pandora, Flipboard, Tumblr and Fullscreen.

 

While Jacobs emphasized that Chernin Group is focused on the digital sectors and Asian territories, he didn’t rule out activities that could involve traditional media companies in the U.S. That could make Chernin a force to be reckoned with at the congloms where his name ends up a candidate for any CEO job that opens up, as it has in recent years for everything from NBCUniversal to Yahoo.

 

The fundamental strategic difference between Chernin Group and current media businesses is the directional flow of revenues. Instead of bringing in money form outside the company to fuel film and TV production capabilities, Chernin Group is betting on its future output to both repay Providence and seed future investments elsewhere.

 

Selling the private-equity firm a minority stake in his budding empire essentially gives Chernin quicker access to dollars that will finance his next round of investments than his shingle’s TV and film properties, which have just begun to reap profits.

 

While U.S.-based TV programming and distribution platforms in Asia might seem disconnected, Jacobs says both strategies go hand in hand. “Premium content becomes more valuable in these emerging markets,” he said.

 

Chernin may be in the process of building an entity that could one day count as a competitor to News Corp. — and the revenues he still gets from the company could pave the way.

 

The lucrative production deal Chernin struck with News Corp. upon his exit from the conglom will give his productions a home there through 2015. Terms of his pact entitle him to financing from News Corp. for at least two films per year, and to develop multiple pilots from his company as well.

 

Providence Equity has taken a significant minority stake in Chernin Group as part of the pact, and in turn Chernin will become a senior adviser at Providence. With a seat at Providence’s table, Chernin could position himself to reunite with Hulu, the digital TV hub he was instrumental in launching while still at News Corp. along with NBCUniversal and Providence, which retains a stake in the venture; Walt Disney Co. later joined the joint venture. Last year, Hulu’s principals shopped the company around but eventually reconsidered the sale.

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