While those two companies are behemoths and Candle Media a newcomer, the claim is not as outlandish as it seems.
At Disney, Mayer was largely responsible the launch of the direct-to-consumer streaming businesses that became Disney+. And as Disney, Pixar and other group content was made exclusive and contained within a walled garden, it stoked demand for premium independently-made content. Candle Media sets its sights on becoming just such a supplier.
At TikTok he learned to appreciate to power of platform-driven targeting, personalization and the scalability of commerce opportunities. While Candle Media is not a technology player, Mayer says the company is in the business of buying firms with well-defined audiences.
Explaining how “valuation haters” initially poured cold water on Disney’s purchase of both Pixar and Marvel, Mayer said that both of Candle Media’s headline acquisitions were expensive but good value.
“You have to look at the cash generation potential under your ownership,” Mayer said, speaking Wednesday in Singapore at the APOS convention. “We did not overpay for Hello Sunshine.” The acquisition of the Reese Witherspoon-headed company for $900 million in mid-2021 shocked many observers. Mayer counters that it has a well-defined audience, is run by women for women.
Moonbug Animation, bought for $3 billion, is built on IP that was largely born on social media. Its headline property CoComelon has grown to 140 million followers on YouTube and (walled-garden) Netflix has series which are licensed exclusively. “We paid a lot. It will be worth a lot more,” said Mayer.
These and future acquisitions, he continued, are creator-led companies where Candle Media can provide the commercial aspects. “In Asia we are looking for rising companies across film/TV, social and commerce,” he said. Moonbug this year acquired Singapore’s One Animation. Deals tend to be a mixture of cash and Candle Media stock.
Mayer also weighed in on the future of premium VOD and moves by companies like Netflix to add advertising-supported tiers. “I think it is quite smart,” he said, backing up his conclusion with the example of (Disney-owned Hulu. When that company added a tier that cost $6 per month less than the premium layer, it generated more than $8 per subscriber of ad revenue. “The economics were feasible either way.”
He said that the companies such as Peacock and HBO Max which are latecomers to the streaming market can succeed as they seek to go global. “Some consolidation will happen,” he said. “But [streaming video] is not a winner takes all situation [unlike music]. If you want to watch ‘The Morning Show’ you have to subscribe to Apple. If you want to watch ‘CoComelon,’ you have to subscribe to Netflix. Nobody needs to subscribe to both Spotify and Apple Music. They have the same content with a different interface.”