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CONFIDENTIAL
WALL STREET MASTERMIND
Sector Spotlight: February & March 2024 Recap
Sector Leads
| Media & Entertainment
Jagger Lambert
| Media & Entertainment
James Concepcion
| Technology
Pan
| Technology
Teddy Kesoglou
| Healthcare
Nina Chhor
| Healthcare
Joe Ames
Project Founders
Jagger Lambert
James Concepcion
CONFIDENTIAL
WALL STREET MASTERMIND
MEDIA & ENTERTAINMENT
Contributors
| Group Head
Jagger Lambert
| Group Head
James Concepcion
| Research Analyst
Joe Possumato
| Research Analyst
Joe Liu
| Research Analyst
Nolan De Jesus
| Research Analyst
Virat Mogli
3
TABLE OF CONTENTS Media & Entertainment
4-5
Current State of the Box Office
I.
6-9
Paramount Transaction Update
II.
10-13
14-25
26-33
AMC Entertainment
Sports Sector Update
Gaming Sector Update
III.
IV.
V.
4
TABLE OF CONTENTS Media & Entertainment
4-5
Current State of the Box Office
I.
6-9
Paramount Transaction Update
II.
10-13
14-25
26-33
AMC Entertainment
Sports Sector Update
Gaming Sector Update
III.
IV.
V.
5
Current State of the Box Office
CinemaCon Releases
2024 gross figures in $USD millions
Title Release Distributor Genre 2024 Gross
Dune: Part Two 3/1/2024 Warner Bros. Action $265
Kung Fu Panda 4 3/6/2024 Universal AAACFF $166
Godzilla x Kong:
The New Empire
3/24/2024 Warner Bros. Action $135
Bob Marley: One Love 2/24/2024 Paramount Drama $97
Ghostbusters: Frozen
Empire 3/22/2024 Sony Sci-Fi
$89
Top Five Performing DBO Films – Q1’24
 While the 2024 & 2025 box office slate seems to be robust with rich franchises, Wall
St. doesn’t expect ticket sales exceeding a pre-pandemic level of $10bn until 2026
 Though 2025 is set to perform better than 2024 due to strike related effects
on production and releases, with many movies now being released in 2025
 ~$1bn in projected box office revenue has shifted from 2024 to 2025
 Full-year 2024 box office revenue could now end up as low as $8bn - $8.4bn before
rebounding to $9.9bn in 2025
 There are currently 36,400 movie screens operating across the U.S., nearly a 12%
decline from 2019
 Cineworld, the world’s second largest movie theater chain and the owner of
Regal Cinemas, emerged from bankruptcy last summer after closing 14.9% of
it’s U.S. locations
Commentary
2.4
1.8
0.2
1.4
1.7
1.6
(25.4%)
(86.8%)
472.0%
27.4%
(6.4%)
-200.0%
-100.0%
0.0%
100.0%
200.0%
300.0%
400.0%
500.0%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2019 2020 2021 2022 2023 2024
Q1 DBO Increase/(Decrease)
Company
Closing Price
(04/08/2024) Eq.Val TEV
EV/LTM
Rev.
EV/LTM
EBITDA
Price /
Earnings
Cinemark $19.18 $2,346 $5,037 1.6x 5.4x 14.3x
IMAX $16.21 859 1,141 3.0x 12.5x 36.1x
AMC $2.95 777 4,869 1.9x 6.6x NM
Mean 2.2x 8.2x 25.2x
Selected Theater Chain Comparables
Is Real Estate Keeping Theaters Alive?
 Disney – “Inside Out
2”, Marvel –
“Deadpool &
Wolverine”,
Universal – “The Fall
Guy”, “Despicable Me
4”, and “Wicked”,
Warner Bros. –
“Furiosa” and the
“Joker” sequel,
Paramount – “A Quiet
Place: Day One” and
“Gladiator II”
 Given the distinctive nature of theater real estate, landlords face challenges when trying to
swap out theaters for other retail operators
 Coupled with increasing construction costs, many property owners have cut
theaters rent just to keep the space occupied, resulting in a universal decrease
in rent expenses for theaters moving forward as repurposing theaters is
difficult given their unconventional layouts and the need for landlords to avoid
vacancies
 Several movie-theater operators are investing in their cinemas from installing giant
screens, playgrounds for children, cocktail lounges for adults, pickleball and bocce courts,
arcades, bowling-lanes, rock climbing walls, and more
 Sales at theaters last year reached $110 per square foot last year, an improvement but still
20% below 2019 levels
Sources: Bloomberg, WSJ, Box Office Mojo
6
TABLE OF CONTENTS Media & Entertainment
4-5
Current State of the Box Office
I.
6-9
Paramount Transaction Update
II.
10-13
14-25
26-33
AMC Entertainment
Sports Sector Update
Gaming Sector Update
III.
IV.
V.
7
Financial State of Paramount Global
21,732.0
4,904.0
3,706.0
30,342.0
20,085.0
6,736.0
2,957.0
29,778.0
0.0
5,000.0
10,000.0
15,000.0
20,000.0
25,000.0
30,000.0
35,000.0
TV Media Revenue DTC Revenue Filmed
Entertainment
Revenue
Total Revenue
2022 2023
55.9
60.0 60.7
62.4
67.5
22%
7%
1%
3%
8%
0%
5%
10%
15%
20%
25%
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023
Subscribers Subscriber growth (QoQ)
Paramount Global Revenue and Adjusted OIBDA change
Paramount+ Growth
Paramount had a rocky year financially with significant losses in earnings in
the first half of 2023 through restructuring and impairment charges
• As cord cutting continued, TV Media revenue and profitability dropped
• Filmed entertainment revenue and profitability also dropped due to impacts of
the writers and actors strikes, and the underperformance of films like Mission
Impossible compared to 2022’s Top Gun Maverick
• DTC revenue dramatically rose and profitability improved through subscriber
growth, ad revenue growth, increased engagement, and price increases (but not
enough to offset losses in TV Media)
Sources: Paramount Global 10k & Trending Schedules
8
AMC Entertainment
Source: SEC Filings, Bloomberg, CNBC
AMC is one of the largest theater operations around the world and through
complete ownership, or partial, operate ~940 theaters with over 10,500
screens worldwide. The Company was founded in 1920.
 The Company avoided bankruptcy during the COVID-19 pandemic when retail
investors were bidding up shares, with an all-time high stock price of $551.38;
The Company’s closing market price as of 4/05/2024 was $3.01
 AMC’s $4.6bn debt load, disappointing financials and a long ways from pre-
pandemic performance has led the Company’s senior creditors into discussions
about the best capital structure solutions for The Company
 Without a debt restructuring, The Company’s obligations will balloon in 2026
when $3bn comes due
 On 03/28/2024, The Company said it could potentially sell up to $250m worth of
stock; shares plunged 14% on the news
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
2024 2025 2026 2027 2028 2029
Revolver 1L 2L Senior Sub.
in $USD millions
except attendance
& screens 2020 2021 2022 2023
Revenue $1,242 $2,527 $3,911 $4,801
% growth 103.5% 54.8% 22.8%
Net Gain/(Loss) (4,589) (1,269) (974) (396)
Adj. EBITDA (999) (292) 46.6 425.8
% margin (80.4%) (11.6%) 1.2% 8.9%
Free Cash Flow (1,303) (707) (831) (441)
Attendance
(thousands) 75,190 128,547 200,965 239,485
Average
Screens
(thousands) 5,049 8,998 10,118 9,850
-
2,000
4,000
6,000
8,000
10,000
12,000
FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023
Theaters Screens
387
906 1,104 1,006 1,004
503
930 940 898
5,426
10,558
11,169
11,091 11,041
6,048
10,448 10,474 10,059
95%
(45%) 73%
$230 $98
$3,396
$525
N/A
$950
Company Overview
Financial Summary
Maturity Schedule (in $USD millions)
Theaters Operated vs. Screens Operated
9
Volatile sales process and share price for Paramount Global – Apollo
9.00
10.00
11.00
12.00
13.00
14.00
15.00
16.00
17.00
18.00
Paramount Global (NasdaqGS:PARA) - Share Pricing
Apollo Global Bid Attempt 1
• March 20th : Apollo Global Management offers the board of Paramount
Global $11 bn for Paramount Pictures
• The bid did not include CBS/CBS networks (news and sports), streaming
(Paramount+ and Pluto TV), and other media assets like BET, Showtime,
and Miramax)
• Apollo owns film studio/film financier Legendary entertainment and
likely saw synergies in bringing together one of the largest
studios/distributors with one of the largest film financiers
• Our SOP valuation of Paramount Global we valued Paramount Pictures at
a median value of $10.4bn so Apollo’s bid represented a 6% premium
• After the stock price rose significantly on news of the bid, the gains were
reversed when Shari Redstone quickly turned down the bid as she didn’t want to
sell the company in parts
Apollo Global Bid Attempt 2
• After Paramount Global’s debt was downgraded to below
investment grade by S&P Global, it nullified the change of control
premium that would have required an acquirer to refinance its
debt (likely at much higher rates)
• March 31st: This allowed Apollo to change its original bid
(since Redstone made it clear that she didn’t want to sell
the company in parts) to a bid for all of Paramount Global
for ($26 bn): assuming $14 bn of Net Debt that would be
close to $17 dollars per share
• While a massive premium, Redstone again did not consider the bid
as the bid lacked details and there are reports of her not wanting
to give her family’s company over to private equity
Apollo Global
Media Investments
Date Deal Size
Legendary
Entertainment (Film) Jan-22
$760m
($2-$2.5bn valuation)
Yahoo (Web Services
Provider) Sep-21 $5bn
Cox Media Group
Mar-19,
Jun-19 $3.1bn, $500m+
WBD
engages
w/PARA on
merger talks
Skydance engages
w/PARA on
merger talks
Byron Allen
submits $30bn
bid for whole
Co.
WBD halts
M&A talks
Apollo bids
$11bn for
studio, rejected
by Redstone
Apollo bids
$26bn for
WholeCo.;
Redstone strikes
tentative deal
w/Skydance
Sources: Hollywood Reporter, CNBC, Bloomberg, CapIQ, Variety
10
Volatile sales process and share price for Paramount Global – Skydance
Class-A & B Transaction Structure
Class-A (Voting Shares):
 Skydance purchases Shari Redstone’s
77% stake in PARA’s Class-A voting-
shares through NAI leading to $2bn in
cash proceeds representing $30 per
share, a 31.5% premium to the
4/10/2024 share price and a 10.2%
premium to it’s 52-week high
 Skydance would then own and control
NAI and would have total voting
control over PARA
 Offer is subject to PARA’s board of
directors guarantee with respect to a
subsequent merger between Skydance
and the remainder of PARA
 NAI would use some cash to repay NAI
obligations
Class-B (Non-Voting Shares):
 PARA would acquire SkyDance in an
all-stock transaction valuing Skydance
at $5bn (Skydance to own 45-51%)
 NewCo. equity would be issued
replacing old equity
 Skydance and it’s backers RedBird,
KKR, and Larry Ellison (Oracle) would
infuse $2-3bn cash into the NewCo.
shoring up the B/S and partly paying
for itself
 PARA film & TV studios and Skydance’s
studio merge
 David Ellison becomes new CEO;
RedBird ex-media execs oversee
different divisions of NewCo.
 Company would look to sell off non-
core assets like BET and Nickelodeon
and would keep CBS
 PARA+ would look for licensing
deals/JV’s and will be kept by PARA
*Tentative deal must now be approved by the Special Committee of the
PARA board, not including Shari Redstone.
Exclusive negotiations with Skydance end 05/03/2024 (four days after
Q1’24 earnings). Turmoil with respect to the stock price has ensued due to
the nature of the deal, with major shareholders implying a class-action
lawsuit and board members resigning. *
Pros & Cons of Skydance Transaction
Pros:
I. Other bids may not be “real”:
I. Byron Allen’s company’s value is
relatively small so financing a deal
this size is likely unrealistic;
similarly, Apollo’s bid appeared
opaque and is much larger than the
typical PE buyout
II. Significant revenue & cost synergies and
key talent:
I. Redbird has former head of Warner
Bros. Sports/CNN, & NBCU Jeff
Zucker and Jeff Shell, former CEO of
NBCU who would both lead NewCo
II. Skydance has John Lasseter, the
former head of Pixar who can help
PARA compete with Disney on the
animation front
III. Skydance and PARA have previously
co-produced notable films
IV. In a world where many studios are
unprofitable, Skydance has
continued to be profitable behind
the savvy David Ellison
III. Larry Ellison/Oracle involvement
I. Part of the deal would be granting
Paramount access to Oracle’s
advanced AI tech which could give it
a major advantage in streaming
Cons:
I. Dilutive to shareholders
I. Deal switched from
PARA being acquired
and taken private to
PARA acquiring
Skydance; even with a
cash infusion there
would be ~$2bn worth
of dilution
II. Complex structure
I. Deal needs to go
through several
internal approvals, is
far more complex than
PARA originally
thought and can serve
as a distraction to
management
III. Rival Offers:
I. Other offers serve the
best interests of Class-
B holders; PARA could
have engaged with
Apollo, an offer to
buyout the entire firm
and represented nearly
a 45% premium for
Class-B shares
11
TABLE OF CONTENTS Media & Entertainment
4-5
Current State of the Box Office
I.
6-9
Paramount Transaction Update
II.
10-13
AMC Entertainment
III.
14-25
Sports Sector Update
IV.
26-33
Gaming Sector Update
V.
12
AMC Entertainment Leverage Profile
Cap Table Total Liquidity
Revolver Borrowing Capacity $225
Less: Amount Outstanding 0
Less: Letters of Credit Outstanding 0
Revolver Availability $225
Plus: Cash & Cash Equivalents $884
Total Liquidity $1,109
Corporate Rating
Moody's Caa2
Standard & Poors (S&P) CCC+
Select Ratios
Debt/EBITDA 26.4x
Debt/Unlevered FCF 72.8x
Net Debt & Pref./EBITDA 24.7x
Net Debt & Pref./Unlevered FCF 68.2x
EBITDA/Interest Expense 0.9x
Unlevered FCF/Interest Expense 0.3x
Debt/Book Cap. 125.3%
Fixed-rate debt/Debt 79.2%
Face
Value
04/05/2024
Market
Price
04/05/2024
Market
Value
04/05/2024 Coupon
Cash
Interest Maturity
Credit
Ratings Face Market
Cash & Cash Equivalents $884.00 NA $884.00
Senior Secured Revolving Credit
Facility 225.00 NA 225.00 7.695% 17.31 Apr-24 Caa1/B-
8.443% Senior Secured Notes due
2026 1,920.00 83.750 1,608.00 8.443% 162.11 Apr-26 Caa1/B-
12.75% Odeon Senior Secured
Notes due 2027 400.00 99.63 398.52 12.750% 51.00 Nov-27 B3/B
7.5% First Lien Notes
due 2029 950.00 65.180 619.21 7.500% 71.25 Feb-29 Caa1/B-
1st Lien Secured Debt $3,270 $2,626 $284 7.7x 6.2x
10%/12% Cash/PIK Toggle
Second Lien Notes due 2026 1,425.49 74.490 1,061.85 10.000% 142.55 Jun-26 Caa3/CCC-
Total Secured Debt $4,695 $3,688 $427 11.0x 8.7x
6.375% Senior Subordinated
Notes due 2024 5.03 96.05 4.83 6.375% 0.32 Nov-24 Ca/CCC-
5.75% Senior Subordinated Notes
due 2025 98.32 82.05 80.67 5.750% 5.65 Jun-25 Ca/CCC-
5.875% Senior Subordinated Notes
due 2026 51.50 60.13 30.97 5.875% 3.03 Nov-26 Ca/CCC-
6.125% Senior Subordinated Notes
due 2027 125.47 50.00 62.74 6.125% 7.69 May-27 Ca/CCC-
Total Debt $4,976 $3,867 $444 11.7x 9.1x
Net Debt $4,092
Equity Value $777
Total Enterprise Value $4,869
Memo:
LTM Adjusted EBITDA $425.80
Interest Coverage Ratio 1.0x
Debt / LTM Adj.
EBITDA
Secured debt
represents
94.4% of total
obligations
WACC Figures
Z-Score: - .58 =
>58% chance of
bankruptcy; a Z-
Score < 1.8
signals distress
Cost of Equity 13.1%
Cost of Debt 8.3%
Weighted Average Cost of Capital 9.0%
Source: SEC Filings, Bloomberg
13
AMC Entertainment – Leverage Outlook
Market Liquidity Outlook AMC Financial Outlook
AMC’s new equity distribution pact for $250m could prove to be a headwind as
analysts expect AMC to lose nearly ($500m) in FCF in FY’24
 Common stock dilution from the $250m stock sale ranges between 14.5% -
31.2%
 The discouraging ($500m) in FCF is a byproduct of movie theaters having
minimal operating leverage, with elevated fixed costs like rent providing a
bleak earnings outlook; The Company expects to deploy $200m in ‘24 CapEx
 Cash interest payments are likely to decline $44m vs 2023
 Short interest as a percent of float stood near 15.2% as of April vs. 61.1% in
December 2020
 A stronger operational backdrop in 2025 could be a conducive refinancing
environment
 Management expects the domestic box office to increase by at least $1bn
from this year’s $7.9-$8.1bn estimates
 Consensus expects The Company to generate $5.1bn in revenue and $571m
in Adj. EBITDA in FY’25
 It’s very unlikely that retail investors pump the stock price as we saw in 2021 with
the AMC frenzy
AMC $250m Equity Distribution
AMC Common Shares Outstanding 263.30
Employee Incentive Reserve 0.437
Total AMC Common Shares Outstanding & Reserved Pre-Sale 263.74
Shares Needed to Meet $250m Assuming Last Share Price (4/8/2024) 84.75
Shares Needed to Meet $250m Assuming Average Trailing
6-Month Price ($6.54)
38.23
Total AMC Common Shares Outstanding and Reserved Post ATM 301.96 - 348.48
Total AMC Common Shares Authorized 550
Total AMC Common Shares Post Equity Raise 201.52 - 248.04
For the first time in > two decade, it’s now cheaper to sell shares than to issue
debt securities
 What used to be a no-brainer – issuing debt – is now more of a calculated decision
and with all-time stock prices for some and periods of distressed for others, has led
companies to raise equity through the capital markets
 In the past two years, companies in the S&P 500 have seen the cost of equity
fall a little over 4%
 On the contrary , issuing debt in the bond market– for US investment-grade
companies – has doubled in the past two years to around 5.5%
 However, there continue to be plenty of options in the private markets such as
private credit
JP Morgan expects a “structurally higher” equity supply on the horizon, with an
increase of $360bn globally this year in net supply
(400)
(200)
0
200
400
600
800
2004 2023
Source: SEC Filings, Bloomberg
14
TABLE OF CONTENTS Media & Entertainment
4-5
Current State of the Box Office
I.
6-9
Paramount Transaction Update
II.
10-13
AMC Entertainment
III.
14-25
Sports Sector Update
IV.
26-31
Gaming Sector Update
V.
15
Bundesliga Media Rights Deal – Proposal
Sources: Bloomberg, Reuters, Forbes, The Athletic
Context
 The Deutsche Fussball Liga (the “DFL,” who oversee Bundesliga and 2. Bundesliga) is
exploring a partial sale of its TV income rights for a cash injection of around €1bn
 This would allow private equity firms to invest in the DFL and sell at a higher value
 The DFL holds stable TV broadcast figures, a media deal renewal in 2025, and
the highest average game attendance in world soccer (42,966)
 DFL officials want German soccer to increase and diversify future revenue streams
 This includes increasing the DFL’s foreign marketing presence and creating a
dedicated streaming service for Bundesliga and 2. Bundesliga games
 Some other potential increases in viewership and revenue have been rejected due to
concerns over fan reaction
 Changes to kickoff times and fixture location
 Increased media access to teams (like All or Nothing or Hard Knocks)
Timeline
 May 2023: 36 clubs (the “German Clubs”) in the Bundesliga and 2. Bundesliga fail to
get a two-third’s majority vote to sell 12.5% of the league’s media distribution rights
at a valuation that could reach €16bn
 December 2023: The German Clubs approve a revised proposal that would lead to a
bidding process aimed to inject €1bn into the Bundesliga for as much of 8% equity of
their TV rights. It is rumored that the bidding process started with four private equity
firms preparing offers for the media rights
 February 2024: CVC Capital Partners is revealed as the last remaining candidate in
the bidding process after Blackstone announced that it had exited negotiations. A
decision is expected by the end of March, and fan protests are expected throughout
the nation
€.5bn
€1.bn
€1.5bn
€2.bn
€2.5bn
€3.bn
€3.5bn
Premier League
(England)
La Liga / La Liga
2 (Spain)
Serie A / Serie B
(Italy)
Bundesliga / 2.
Bundesliga
(Germany)
Ligue 1 / Ligue 2
(France)
International
Domestic
Average Attendance of Major European Soccer Leagues
Major European Soccer League Broadcasting Revenue per Year
16
Bundesliga Media Rights Deal – Fan Backlash and Cancellation
Sources: Forbes, SBJ, The Athletic
Criticism Over Deal Strategy
 Critics of the proposal take issue with the distribution of capital to member clubs;
80% of funds are allocated to the Bundesliga, and within the first division, the
distribution scale is greatly in favor of the most successful clubs within the league,
which will, in theory, reduce competitive balance within German soccer
 Others are unsure whether the hoped-for growth will be enough to offset the loss of
media distribution rights over the next 20 years
 Supporters of German soccer are fearing that CVC’s investment into DFL media rights
after similar investments in rival leagues could represent a conflict of interest
Fan Protest
 Cultural Significance of German Soccer:
 Fan affiliation is strongly determined by the community and historic values of the club
 German Soccer fans see the entrance of private equity firms like CVC as surface-level
cash injections at the expense of the uniqueness of German soccer culture
Historic Context of Germany’s “50+1” Rule:
 Historically, German teams were not-for-profit organizations run by members'
associations, and until 1998 private ownership of any kind was prohibited
 Today, it is still very likely that a club is >95% owned by club members
 Member-led clubs prioritize low levels of debt, stable operating expense and cheap
ticket prices; the Private Equity operating model is incompatible with these beliefs
Protests:
 This month, many games across the DFL were delayed/suspended after various forms
of fan protest over the proposed media rights deal with CVC
 As suggested, these concerns were mostly over the potential loss of the community-
based culture and against the potential of reckless spending by the DFL and clubs
Cancellation
 On February 21, it was announced that the DFL would not continue in its plans to sell
a stake in its media rights business to CVC following supporter protests
 The DFL said continuing with negotiations was impossible as protests were
increasingly jeopardizing match operations, schedules and integrity of the game
 Additionally, there was a concern that the agreed-upon deal would lack broad
acceptance from all clubs and supporters
 At the moment, there are no plans to reopen negotiations or to restructure the deal,
and no new bidding parties are expected to approach the DFL for their media rights
Club Member Ownership Outside Investment
Ownership Structure (in % of overall ownership)
17
Bundesliga Media Rights Deal – Deal Structure
Sources: Bloomberg, Forbes, The Athletic, Statista, Bundesliga
Structure and Factors
Deal Structure:
 DFL will set up a separate holding company which will hold their TV rights; the winning bidding party will invest capital into this vehicle, effectively giving them ownership of voting
shares that control strategic media and marketing-related activities. DFL’s originally planned on a €2bn cash injection in exchange for a 12.5% equity stake in the new HoldCo, which
would operate for the next 20 years. The revised deal now revolves around a €1bn cash injection, with the equity stake being the new central variable in negotiations
 Deal is comparable to recent media rights transactions: last year, CVC purchased 15% and 8.25% of Ligue 1’s and La Liga’s media rights for €1.5bn and nearly €2bn, respectively
Intended Uses of Funds
 40% of new funds will be spent on “digitalization and internationalization” of the leagues, including a new streaming channel, 45% will be allocated to club infrastructure budgets
(stadiums, training and youth facilities), with the final 15% given to clubs for operating expenses. The allocation of funds to clubs will be decided using the existing distribution model
German Soccer Considerations
 DFL’s desire for this unique deal structure is due in part to the particularly high regulatory barriers to direct investments into individual clubs. German clubs are required by law to
have 50% of voting shares, plus one additional share, owned by members of the club. This “50+1 rule” guarantees majority ownership to club members and, in turn, reduces financial
risk at the expense of reduced profits
 The idea of the DFL taking out debt to finance these operations has been proposed, but the Bundesliga has stated that it would not be responsible measure to place debt on their
member clubs. Additionally, the idea of an equity investment is welcome to increase their marketing capabilities and international private equity connections
Revenue /
Viewership
Viewership
per season
Total TV
rights
International
TV rights
Domestic
TV rights
Current Deal:
Last Year
Current Deal:
First Year
League
16.0x
200.26mm
3200mm
1450mm
1750mm
2024/2025
2021/2022
Premier League
14.9x
114.38mm
1700mm
710mm
990mm
2026/2027
2022/2023
La Liga
12.2x
92.148mm
1120mm
200mm
920mm
2023/2024
2020/2021
Serie A
15.7x
81.5mm
1280mm
180mm
1100mm
2024/2025
2021/2022
Bundesliga
12.2x
54.1mm
662mm
80mm
582mm
2023/2024
2021/2022
Ligue 1
Comparable Valuations
18
Announcement of Sports Streaming App Between Fox, ESPN and Warner Brothers
Sources: WSJ, CNBC
Background
 Fox, ESPN and Warner Brothers Discovery are teaming up to create a sports streaming
application that will centralize their contracted media rights for North American
sports onto a single platform, and will be offered directly to consumers
 The new arrangement will effectively centralize around 55% of North
American sports rights, and will include popular sports TV networks such as
ESPN, TNT and Fox Sports 1, among others
 The three parent companies will split ownership evenly over the new IP
 Price points for the application have yet to be announced, but are expected to
be lower than typical cable sports bundles, which often exceed $100
 It is expected that current subscribers of streaming services—including
Disney+, Hulu and Max, which are owned by the companies in the new
streaming agreement— will have the ability to subscribe to the new service as
part of a discounted bundle
Commentary
League Reactions
 Delicate relationships between sports leagues and media networks will be tested; the streaming service has been long discussed internally, but it was reported that most sports
league executives were blindsided by the news and not informed directly from the media networks themselves
 This is particularly important given the current negotiations over media rights between the NBA and both Warner Brothers Discovery and Disney, who owns ESPN
 There is an internal fear from sports leagues that these alliances between major media networks could cultivate a collusive relationship and hinder future media rights negotiations
Media Trends
 This deal could represent a shift in sports media distribution strategy; historically, companies have been hesitant to offer their most-valuable sports properties—such as NFL, NBA
and MLB games—outside their respective high-price traditional cable package. This has made watching sports exclusively on streaming platforms particularly complex
 However, with the acceleration of cord-cutting (recent estimates suggest an annual decline of 7% for traditional TV), media companies are seeing the writing on the wall and are
shifting their focus to the streaming world
 There are risks to decentralized ownership over streaming services; Disney is currently experiencing difficulties in their attempt to buy Comcast out of its joint ownership over Hulu
$12.9bn
$28.0bn
$13.2bn
Fox
Disney
Warner Brothers
Estimated Value of Sports Steaming Service Offerings
19
Estimated Sports Streaming Market Share Post-JV
Sources: ESPN Press Release
20%
30%
14%
12%
10%
7%
7%
Cable/Satellite
ESPN+FOX+WB
Peacock
TV
YouTube TV
Apple TV
Sling TV
Fubo TV
20
Super Bowl LVIII Viewership Review
Sources: CNN, Forbes, SportsMediaWatch.com
Summary
 Super Bowl LVIII, which saw the Kansas City Chiefs defeat the San Francisco 49ers in
overtime, was registered as the most watched Super Bowl in history
 The game averaged 123.4 million viewers, surpassing the record set last year
of 115 million viewers
 The game approached the all-time most watched television broadcast in US
history, which was the 1969 Apollo 11 moon landing viewed by an estimated
125 to 150 million viewers
 The broadcast was hosted CBS and simulcasted on other services offered by
Paramount Global, which include Paramount+, Univision and Nickelodeon
 Advertising revenue continued to rise at a strong and steady rate; it is estimated that
$650mm was spent on advertisements this year, up from $600mm representing an
8.3% annual increase
Viewership Demographics
 The increase in viewership is likely due to several factors; the game was considered a
competitive matchup between teams of equal strength, and featured some of the
games most marketable players like Patrick Mahomes, Christian McCaffrey, Brock
Purdy and Travis Kelce, who all rank in the top ten of NFL jersey sales
 The game’s viewership was further boosted by the attendance and heightened interest
surrounding musician Taylor Swift
 The pop superstar began attending Chiefs games in October due to her ongoing
romance with tight end Travis Kelce
 NFL and media executives have publicly acknowledged that her presence has
been followed by an increase in viewership in both younger and female
demographics, helping the NFL tap into additional viewership markets
$322
$376
$430
$341 $339
$449
$545
$578
$600
$650
-20%
-10%
0%
10%
20%
30%
40%
300
400
500
600
700
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Advertising Expenditure (in $ mm)
Total Expenditure Growth rate
123.7
115.1
112.3
101.6
118.5
100 105 110 115 120 125
SB LVIII (2024)
SB LVII (2023)
SB LVI (2022)
SB LV (2021)
SB LIV (2020)
Average Super Bowl Viewership (in millions)
21
Lewis Hamilton – Ferrari Deal
Sources: Forbes, CAR Magazine, Fortune
$330
$340
$350
$360
$370
$380
$390
$400
$410
$420
$430
150k
350k
550k
750k
950k
1,150k
1,350k
1,550k
1/2/24 1/9/24 1/16/24 1/23/24 1/30/24 2/6/24 2/13/24 2/20/24 2/27/24
Summary
Formula One (“F1”) driver Lewis Hamilton announced that he will leave the
Mercedes-AMG Petronas F1 team after eleven years via a release clause in his
current contract. Hamilton, considered the sport’s most famous driver, will join
Scuderia Ferrari in 2025.
Driver Accomplishments:
 Most successful driver in history with 103 wins and 104 pole positions
 7-time F1 world champion (matched only by one driver in F1 history)
 In 2023, Hamilton finished 3rd in the driver championship standings
Fallout:
 Ferrari’s move to join Lewis Hamilton with Charles Leclerc (5th place overall in 2023)
will challenge Red Bull’s recent dominance over F1
 Last year, Red Bull won 21/22 Grands Prix, breaking the all-time F1 team record for
highest percentage of Grand Prix wins in a season at 95.45%
 Hamilton’s fame, which was boosted after the emergence of Netflix’s Drive to Survive,
will stir interest in the sport and affinity towards Ferrari’s F1 team
Commentary
Comparison to Hamilton – Mercedes deal in 2013:
 In 2013, Hamilton’s move from the frontrunning McLaren to a competitive Mercedes team was a signal of confidence for the automaker’s quality; 2013 represented an increase in
Mercedes’ market capitalization from $58.4bn to $98.2bn, compared to an estimated growth in market capitalization for comparable automakers of 30% during the same year
 Hamilton’s six championships over the next eight seasons gave the Mercedes F1 team unforeseen prize money and sponsorship revenue; between 2013 and 2023, the value of
Mercedes’ F1 team rose from $400mm to $3.8bn, making them the second most valuable F1 team
 Additionally, Hamilton’s association with Mercedes Benz increased the automaker’s brand awareness on an international stage and gave them a positive marketing resource
Affect on Ferrari Share Price:
 Upon the news release, Ferrari’s share price experienced a 12.6% intraday increase in valuation and nearly 5x the trading volume of comparable days surrounding February 1
 Not only does Hamilton’s signature signify Ferrari’s strong financial health, but it also gives the brand a larger international presence and reassures the quality of their products
Single-day share price
increase of 12.6% on
2/1/24, trading volume
4.86x higher than usual
22
PGA Third-Party Investment
Sources: Bloomberg, Forbes, PGA, USA Today, The Athletic
Commentary
Summary:
 The Strategic Sports Group (“SSG”), a consortium highlighted by Fenway Sports Group
and various US-based sports franchise owners, announced that it has created PGA
Tour Enterprises and would invest up to $3bn into the sport
 The deal structure includes an initial investment from Strategic Sports Group of an
initial investment of $1.5bn and will rise to $3bn with an option for future inclusion
from the LIV golf, which itself is financially backed by the Saudi Arabian Public
Investment Fund (“PIF”), a sovereign wealth fund
 This comes as a surprise after the June announcement that highlighted the potential
merger between the PGA and LIV golf, but this potential merger has been slowed by
legislative roadblocks and split public opinions on the ramifications of said merger
Potential Structural Changes:
 The deal centers around the creation of a new for-profit entity, PGA Tour Enterprises,
that will allow nearly 200 PGA Tour members the opportunity to gain equity in
 PGA Tour Enterprises is also considering reallowing participation for golfers who had
previously joined LIV Golf or joined the PGA Tour from the collegiate level
Other Considerations:
 The deal and subsequent change to a for-profit operating model would represent a
significant change in the operating structure of the league
 The PGA tour has historically placed a strong emphasis on charity fundraising
and, with rare exception, requires all Tour events to be non-profit
 Proposed structural changes could jeopardize the Tour’s tax-exempt status
 Potential future collaboration with the PIF could be complicated given the previous
difficulties passing legal scrutiny, including antitrust laws
 Additionally, the previously-set December 31 deadline to come to a definitive
agreement with LIV Golf has been extended, but any PIF inclusion is expected
to take considerable time to approve
$750mm
$75mm
$75mm
$30mm
$600mm
Top 36 golfers based on
career performance
(weighted towards the
previous five seasons)
and Player Impact
Program results
Top 64 golfers (based on
the previous three
seasons)
36 golfers considered to
be "instrumental in
building the modern PGA
Tour" (based on career
performance)
 Fenway Sports Group (Boston Red Sox,
Pittsburgh Penguins, Liverpool FC, + others)
 RedBird Capital Partners (AC Milan +
others)
 Mark Attanasio (Crescent Capital,
Milwaukee Brewers, Norwich City FC)
 Arthur Blank (co-founder of Home Depot,
Atlanta Falcons, Atlanta United + others)
 Steve Cohen (Point72, New York Mets)
 Wyc Grousbeck (Boston Celtics)
 David Moross (HighPost Capital)
 Mark Bezos (HighPost Capital)
 Marc Lasry (Avenue Capital, Milwaukee
Bucks)
 Tom Ricketts (Incapital, Chicago Cubs)
Strategic Sports Group: Notable Investors
Use of Funds From Initial $1.5bn Investment
23
US Sports Streaming Market
• Over half (51%) the Americans have made the switch to
streaming-only sports viewing
Most Popular Sports League to watch
• A majority of Americans (87%) are watching live sports through
some cable or streaming package
Sources: GlobalMarketEstimates, Reviews.org
65%
51%
42%
30%
25%
24%
20%
17%
17%
13%
12%
12%
12%
11%
11%
10%
9%
9%
8%
0% 10% 20% 30% 40% 50% 60% 70%
Football, NFL
Basketball, NBA
Baseball, MLB
College Football, NCAA
College Basketball, NCAA
Auto racing, NASCAR
Hockey, NHL
Auto racing, F1
Combat Sports, UFC
Combat Sports, Bellator MMA
Basketball, WNBA
Soccer, MLS
Basketball, NBA G League
Auto racing, IndyCar
Combat Sports, WWE
Golf, PGA
Basketball, WNBA
Combat Sports, AEW
Combat Sports Boxing, WBA
% of Americans watching Live Sports
Most Popular On-Demand Streaming Service
51%
45%
33%
26%
19%
16%
7%
0% 20% 40% 60%
Prime Video
ESPN+
Peacock
Paramount
Max
Apple TV
% of Americans streaming their sports on
Others
24
Dyal Capital Partners with Lore and Rodriguez to Secure Ownership of Minnesota Timberwolves, Expanding NBA Portfolio
Deal Content
Timberwolves' Current Valuation and Performance:
 The Minnesota Timberwolves, valued at $2.8 billion, are having a successful
season with a record of 47-22
 Despite challenges with funding rounds, Lore and Rodriguez have managed to
progress with the deal initiated in 2021 when Glen Taylor agreed to sell the team
at a $1.5 billion valuation
Partnership with Dyal Capital:
 Marc Lore and Alex Rodriguez partnered with Dyal Capital to finance the
transaction to become controlling owners of the Minnesota Timberwolves(NBA)
and Minnesota Lynx (WNBA)
Dyal Capital's NBA Team Portfolio:
 The fund has minority stakes in the Atlanta Hawks, Sacramento Kings, and
Charlotte Hornets.
 Dyal previously held a stake in the Phoenix Suns before exiting when Mat Ishbia
purchased the team for $4 billion
Expansion of Dyal's Portfolio:
 Dyal's investment in the Timberwolves marks its fourth NBA team ownership,
showcasing its initiative to diversify its portfolio within the sports industry
Sources: Sportico, Forbes
A-Rod & Marc lore purchased 40%
Stake for $600 million at $1.5
billion valuation
A-Rod & Marc Lore purchase
40% Stake financed by Dyal
capital becoming majority
owners
$0.00
$500.00
$1,000.00
$1,500.00
$2,000.00
$2,500.00
$3,000.00
2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
80.00%
20%
New Ownership Structure
Marc lore & A-Rod
Glen Taylor
25
Dyal Capital Partners with Lore and Rodriguez to Secure Ownership of Minnesota Timberwolves, Expanding NBA Portfolio
Commentary
Sources: Sportico, Forbes
 The partnership between Marc Lore, Alex Rodriguez, and Dyal Capital reflects a
strategic move to secure ownership in a successful NBA franchise like the
Minnesota Timberwolves
 The valuation of the Timberwolves and their current performance add value to the
deal, indicating potential growth and profitability for the new ownership group
Charlotte
Hornets
Minnesota
Timberwolves
Sacramento
Kings
Atlanta
Hawks
Dyal Capital NBA Portfolio
Deal Update
 Glen Taylor, the current majority owner of Timberwolves & lynx, confirmed the
expiration of Marc Lore and Alex Rodriguez's option to acquire a controlling
interest in Timberwolves and Lynx.
 The purchase agreement required the closing to occur within 90 days of Lore and
Rodriguez's exercise notice, which expired on March 27, 2024
26
TABLE OF CONTENTS Media & Entertainment
4-5
Current State of the Box Office
I.
6-9
Paramount Transaction Update
II.
10-13
AMC Entertainment
III.
14-25
Sports Sector Update
IV.
26-33
Gaming Sector Update
V.
27
Integration Risks: The integration of
Jackpocket into DraftKings' ecosystem
may present challenges, including
aligning company cultures, integrating
technology platforms, and managing
operational costs
Regulatory Hurdles: Despite the low
political barriers to Jackpocket's business
model, the broader regulatory landscape
remains complex
Market Reaction: The sports betting and
iGaming platform’s shares wobbled in
post-market trading, falling as much as
10% due to DrafKings reporting quarterly
revenue that was up 44% but still missed
analyst estimates
Draftkings Acquires Jackpocket
$44.57
$41.49
$38
$39
$40
$41
$42
$43
$44
$45
$46
Draftkings Stock Reaction
 DraftKings' decision to acquire Jackpocket for $750 million, paid in 55% cash and
45% stock, is a strategic endeavor to tap into the burgeoning digital iLottery market
This acquisition is expected to bolster annual revenue by approximately $340
million, showcasing the company's push for diversification and market dominance
 With Jackpocket's established presence in the lottery space, being the largest seller of
lottery tickets in New York, DraftKings is set to redefine the gaming landscape
Overview
DraftKings Stock Reaction
Diversification: Bolsters market
efficiency and customer offerings, akin to
the leverage gained from its fantasy sports
database, by introducing new products
that enhance customer acquisition and
lifetime value in the sports betting and
online gaming sectors
Scope Expansion: Ability to cross-sell the
Jackpockjet audience to OSB and online
casinos. Jackpocket’s political hurdles
offer a seamless expansion path compared
to traditional iLottery initiatives. Secures a
foothold in iLottery growing at 15x the
broader US lottery market
Strategic Partnerships: The deal also
opens doors to strategic partnerships,
evidenced by Jackpocket's collaboration
with the NHL’s New York Islanders
Synergies Challenges
Multiple
LTM Rev
Implied EV
Stake
Buyer
Target
Announced
9.7x
$78mm
$758.05mm
100%
DraftKings
Jackpocket
Feb-15-2024
1.9x
152.5
290.8
51%
Flutter
Max Bet
Sep-27-2023
6.3x
142.1
892.1
100%
Entain
STS Holding
Jun-13-2023
8.1x
80
647.9
64%
PENN
Entertainment
Barstool Sports
Aug-17-2022
1.5x
414.1
630.2
100%
MGM
LeoVegas
May-01-2022
1.8x
1,510.9
2,677.1
100%
888 Holdings
William Hill
Sep-09-2021
7.0x
60.9
425.0
96%
Entain
Enlabs
Jan-07-2021
28
Roblox: The platform reports over 71 million
daily active users, a 22% year-over-year increase,
and $750 million in quarterly revenue, up 30%.
Roblox is expanding its demographic, increasingly
engaging users over 13 while retaining its
younger audience
Disney Stake in Epic Games
On February 7, The Walt Disney Company acquired a $1.5 billion stake in Epic Games, aiming to integrate its extensive portfolio of characters and stories into Epic's digital
platforms, and represents Disney's most significant investment in the gaming sector to date.
 Aim to capture the attention of 3.3 billion consumers,
especially younger generations and the 100+ million new
gamers entering annually
 Importance of Gaming for IP Holders: Gaming captures
significant consumer time; Disney CEO Bob Iger
highlights its equal or greater appeal compared to movies
and TV for some demographics
 Creating a Virtual Disney Theme Park: Disney aims to
create a virtual theme park with Epic Games, blending
nostalgia with modern gaming experiences and
integrating extensive Disney IPs
 Impact on User-Generated Content (UGC): This move
is part of a broader trend of IP owners exploring
partnerships in the UGC space, particularly with Roblox
and Unreal Editor for Fortnite Disney's investment is
poised to further fuel the growth of the UGC vertical,
highlighting the unique development paths of leading
UGC platforms
 As intellectual property (IP) increasingly enters the
gaming sector, the owners of these IPs are dedicating
significant efforts to form partnerships and integrate
with the top entities in the User-Generated Content
(UGC) domain: Roblox and UEFN (Epic Games)
Opportunities Two Giants within UGC
Epic Games has seen a valuation of $22.5 billion
after Disney's $1.5 billion investment. Epic
recently introduced UEFN, a direct competitor to
Roblox, offering a higher revenue share to
creators at 40%, compared to Roblox's 24-29%
21.3 24.5 23.1 23.6 25.5 24.2 26.4 26 28.7 28.2 29.7 29.3
20.5
21.4 23.8 25.6
28.9 27.7 31.9 32.4
36.9 36.8
40 41.4
41.8
45.9 46.9
49.2
54.4
51.9
58.3 58.4
65.6 65
69.7 70.7
1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23
Roblox - Daily Active Users by Age Group (millions)
+102%
+50%
Over 13 years old
Under 13 years old
29
Indie Games in 2024
In 2024, indie titles like Palword ($6.75 million budget surpassing 25 million
units sold), Granblue, and Last Epoch are among the top ten highest-grossing
games on Steam. This dominance is part of a decade-long increase in indie
games' market share, with indie games accounting for 31% of all Steam revenue
in 2023, up from 25% in 2018
Unprecedented Success Drivers
35% 36% 35%
44%
38%
29%
47%
25%
27%
28%
30%
32% 31%
43%
20%
30%
40%
50%
2018 2019 2020 2021 2022 2023 2024
Indie Game Revenue on Steam
Indie Game % Games > $10M Rev Indie Games as % of Steam Rev
78% 78%
76%
79%
74% 74%
67%
70%
72% 72%
73% 72%
65%
70%
75%
80%
2018 2019 2020 2021 2022 2023
Steam Games Rating by Publisher Classification
Paid AAA Paid Indie
 Shifting Gamer Preferences: The movement towards indie games reflects a
broader dissatisfaction with the AAA sector's lack of innovation, marked by a
prevalence of sequels and remakes. This sentiment is captured in industry
commentary highlighting the fresh and inventive experiences offered by indie
 Indie vs. AAA Quality Parity: Indie and AAA games are now nearly equal in
average Steam ratings, demonstrating that indie games can compete with AAA
titles in player experience despite often lacking in graphical fidelity and complexity
 Democratization of Development Tools: Advances in game development tools
like Unreal Engine and Unity have lowered barriers to entry for indie developers,
enabling them to focus on creativity and storytelling. This trend is complemented
by platforms like Steam, which revolutionize game distribution
Market Share Success Amid AAA Releases
Despite the high volume of blockbuster AAA titles in 2023, indie games have
maintained their revenue share on Steam. The expected drought in AAA releases
in 2024 is likely to further boost indie games' prominence on Steam charts. Indie
and AAA games are also now nearly equal in average Steam ratings
30
Impact of the EU Digital Markets Act (DMA) on Software Purchases
What is the Digital Markets Act?
 Passed by the European Commission in March of 2022, the Digital Markets
Act sought to make consumer software purchases fairer and more
contestable
 Specifically, it outlines monopolies in the market (known as ”gatekeepers”
who provide core platform services must comply with key obligations and
prohibitions
 The act forces significant fines (upwards of 10% of a platform’s annual
turnover) in the event a company is found to be responsible for
‘gatekeeping’ equal accessibility to all developers and software products
 Applies to companies with annual turnover over $7.9bn, market value
over $79bn, and active user base of over 45mm in the EU
 Upcoming deadline of March 6, 2024 for companies to comply for face
fines
Implication for US Software Marketplaces
 Companies with established software product portfolios will be
incentivized to develop competing platforms for specific application
markets
 Yet as the law is enforced in the EU, US regulators and lawmakers may
seek similar enforcement mechanisms to control monopolistic software
platforms
 Smaller developers with tighter budget constraints may garner more
visibility as in-store marketing skews away from larger developers
Companies Identified as ‘Gatekeepers'
DMA Enforcement Timeline
Mar ‘22
•Political
Agreement on
DMA
May '23
•DMA rule
application
and
enforcement
Sep '23
•Designation of
'Gatekeepers'
Mar '24
•Fines and
Penalties
levied to
'Gatekeepers'
31
2024 Revenue Outlook
 Negative expectations for forecasted 2024 revenue growth in the PC
market due to:
 lack of strong game releases compared to 2023
 loss of PC market share due to the popularity of gaming consoles
(Xbox, PlayStation)
 continued price pressure from freemium and discounted games
 Despite the downturn, PC games market is expected to grow (2025-2028)
as longer-term trends take over:
 Continued growth of Steam as a platform for developing
geographies and markets
 Increased gamer appetite for indie releases exclusively on PC
 Addition of traditionally console-only titles to PC platforms
Key Strategies
 Sports-related games (FIFA, NBA 2K, etc.) have adopted steeper
discounting strategies during seasonal purchasing periods
 Microtransactions (MTX) were a popular monetization strategy until
2023, with the trend reversing course in favor of larger in-game
transactions
 Top games in the PC market lack free-to-play models and instead focus on
multiplayer/co-op formats
Top Trends in PC Gaming
 The top 100 released games accounted for 91% of total revenue while the remaining
13,871 games contributed 9%
 Lack of Microtransactions in newly released games in 2023 continues into new
releases for 2024
 Indie developers (groups/developers from 1-16 people) carry significant attention
due to blockbuster releases in 2023
PC Gaming Outlook
9 8.8 9.2
10.2
10.9
11.5
0
2
4
6
8
10
12
14
2022 2023 2024E 2025E 2026E 2027E
Steam Market Revenue Forecast (2022-2027)
Full Game Sale Revenue ($bn)
32
Key Drivers
 Widens the potential user base as gamers don’t need expensive console or
PC gaming hardware to access AAA and mainstream game titles
 Fast adoption of 5G and fiber optic internet technology decrease barriers
to entry for internet requirements that allow cloud gaming services to
compete with hardware offerings
 Major players like NVIDIA (GeForce Now), Boosteroid, and Microsoft
(Xbox Cloud Gaming) both a) invest heavily in cloud hardware capabilities
in data centers and hosting technology and b) integrate popular titles to
attract a wide user base to switch from traditional gaming setups
 Decrease in last-mile packet loss rates, alleviation of network congestion,
and lower latency rates have brought the offering closer to the traditional
hardware experience
Video Streaming vs File Streaming
 The video streaming segment is more reliant on cloud-based technology
as the majority of computational power is centralized at a data center
 As a result, it’s the most popular cloud streaming solution and is
expected to grow at a CAGR of 46.20%
 The file streaming market requires higher barriers to entry for consumers
(requiring computational power to run the game off-site) and is less
popular with gamers as an alternative to traditional gaming hardware
solutions
Key Markets & Demographics
 The Asia-Pacific region (CAGR 44.50%) is the most significant in the global cloud
gaming market, with China driving expansion with new technology integration and
capabilities
 The North America region lags behind the Asia-Pacific region in market share yet is
slated to grow at a CAGR of 43.5% due to the significant adoption of data centers and
media services
Cloud Gaming Outlook
0.9
1.4
2.2
3.3
4.6
5.9
32.0 31.2
36.3
47.1
61.7
76.7
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2022 2023 2024E 2025E 2026E 2027E
Forecasted Cloud Gaming Market Revenue & ARPU
Revenue (in $bn) ARPU (in $)
33
Mobile Gaming Outlook
Advertising and Monetization Revenue
 Mobile developers are finding ways to monetize key user bases as
ARPDAU (avg revenue per daily active user) is down 13% since 2022
 Loss is driven by a decrease in IAP (in-app purchases) while IAA
(in-app advertising) increased by 26.7%
 Subsector gains are most evident in simulation, casual, and puzzle
games that capitalize on in-game advertising
 Diversification in advertising strategies is shown to increase daily
engagements as developers are integrating ads with in-game monetization
(Offerwalls)
 The adoption of piggy banking in-game currencies entices users to actively
seek advertising offerwalls and increase per-advertisement revenue
Platform Diversification
 Smaller studios that dominate the mobile market have increased
multiplatform game development by 71% over the past 2 years
 34% increase in games launching on three or more platforms
between 2022 and 2023
 Mobile and desktop are the most popular platforms for studios of
fewer than 50 people
 RPG (role-playing games) lead in multiplatform development,
while multiplatform engagement is a key factor in video game
design
23%
9%
6%
Developer Game Development Pipeline
Multiplayer Singe-player (network gameplay)
Single player (no network gameplay) Couch co-op
62%
Emphasis on Multiplayer Gaming
 Mobile-only games featuring multiplayer functionality on average had 40.2% more
monthly active users compared to those without
 As a result, developers have increased their development pipeline compared to
single-player games
 Multiplayer gaming revenue is expected to grow 7% following 2023 growth
of 10%, creating a TAM of $2.3Bn
CONFIDENTIAL
WALL STREET MASTERMIND
For questions on material please reach out to lambertjagger@gmail.com or jamesconcepcion217@gmail.com
Contributors
| Group Head
Jagger Lambert
| Group Head
James Conception
| Research Analyst
Joe Possumato
| Research Analyst
Joe Liu
| Research Analyst
Nolan De Jesus
| Research Analyst
Virat Mogli

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WSMM Media and Entertainment Feb_March_Final.pdf

  • 1. CONFIDENTIAL WALL STREET MASTERMIND Sector Spotlight: February & March 2024 Recap Sector Leads | Media & Entertainment Jagger Lambert | Media & Entertainment James Concepcion | Technology Pan | Technology Teddy Kesoglou | Healthcare Nina Chhor | Healthcare Joe Ames Project Founders Jagger Lambert James Concepcion
  • 2. CONFIDENTIAL WALL STREET MASTERMIND MEDIA & ENTERTAINMENT Contributors | Group Head Jagger Lambert | Group Head James Concepcion | Research Analyst Joe Possumato | Research Analyst Joe Liu | Research Analyst Nolan De Jesus | Research Analyst Virat Mogli
  • 3. 3 TABLE OF CONTENTS Media & Entertainment 4-5 Current State of the Box Office I. 6-9 Paramount Transaction Update II. 10-13 14-25 26-33 AMC Entertainment Sports Sector Update Gaming Sector Update III. IV. V.
  • 4. 4 TABLE OF CONTENTS Media & Entertainment 4-5 Current State of the Box Office I. 6-9 Paramount Transaction Update II. 10-13 14-25 26-33 AMC Entertainment Sports Sector Update Gaming Sector Update III. IV. V.
  • 5. 5 Current State of the Box Office CinemaCon Releases 2024 gross figures in $USD millions Title Release Distributor Genre 2024 Gross Dune: Part Two 3/1/2024 Warner Bros. Action $265 Kung Fu Panda 4 3/6/2024 Universal AAACFF $166 Godzilla x Kong: The New Empire 3/24/2024 Warner Bros. Action $135 Bob Marley: One Love 2/24/2024 Paramount Drama $97 Ghostbusters: Frozen Empire 3/22/2024 Sony Sci-Fi $89 Top Five Performing DBO Films – Q1’24  While the 2024 & 2025 box office slate seems to be robust with rich franchises, Wall St. doesn’t expect ticket sales exceeding a pre-pandemic level of $10bn until 2026  Though 2025 is set to perform better than 2024 due to strike related effects on production and releases, with many movies now being released in 2025  ~$1bn in projected box office revenue has shifted from 2024 to 2025  Full-year 2024 box office revenue could now end up as low as $8bn - $8.4bn before rebounding to $9.9bn in 2025  There are currently 36,400 movie screens operating across the U.S., nearly a 12% decline from 2019  Cineworld, the world’s second largest movie theater chain and the owner of Regal Cinemas, emerged from bankruptcy last summer after closing 14.9% of it’s U.S. locations Commentary 2.4 1.8 0.2 1.4 1.7 1.6 (25.4%) (86.8%) 472.0% 27.4% (6.4%) -200.0% -100.0% 0.0% 100.0% 200.0% 300.0% 400.0% 500.0% 0.0 0.5 1.0 1.5 2.0 2.5 3.0 2019 2020 2021 2022 2023 2024 Q1 DBO Increase/(Decrease) Company Closing Price (04/08/2024) Eq.Val TEV EV/LTM Rev. EV/LTM EBITDA Price / Earnings Cinemark $19.18 $2,346 $5,037 1.6x 5.4x 14.3x IMAX $16.21 859 1,141 3.0x 12.5x 36.1x AMC $2.95 777 4,869 1.9x 6.6x NM Mean 2.2x 8.2x 25.2x Selected Theater Chain Comparables Is Real Estate Keeping Theaters Alive?  Disney – “Inside Out 2”, Marvel – “Deadpool & Wolverine”, Universal – “The Fall Guy”, “Despicable Me 4”, and “Wicked”, Warner Bros. – “Furiosa” and the “Joker” sequel, Paramount – “A Quiet Place: Day One” and “Gladiator II”  Given the distinctive nature of theater real estate, landlords face challenges when trying to swap out theaters for other retail operators  Coupled with increasing construction costs, many property owners have cut theaters rent just to keep the space occupied, resulting in a universal decrease in rent expenses for theaters moving forward as repurposing theaters is difficult given their unconventional layouts and the need for landlords to avoid vacancies  Several movie-theater operators are investing in their cinemas from installing giant screens, playgrounds for children, cocktail lounges for adults, pickleball and bocce courts, arcades, bowling-lanes, rock climbing walls, and more  Sales at theaters last year reached $110 per square foot last year, an improvement but still 20% below 2019 levels Sources: Bloomberg, WSJ, Box Office Mojo
  • 6. 6 TABLE OF CONTENTS Media & Entertainment 4-5 Current State of the Box Office I. 6-9 Paramount Transaction Update II. 10-13 14-25 26-33 AMC Entertainment Sports Sector Update Gaming Sector Update III. IV. V.
  • 7. 7 Financial State of Paramount Global 21,732.0 4,904.0 3,706.0 30,342.0 20,085.0 6,736.0 2,957.0 29,778.0 0.0 5,000.0 10,000.0 15,000.0 20,000.0 25,000.0 30,000.0 35,000.0 TV Media Revenue DTC Revenue Filmed Entertainment Revenue Total Revenue 2022 2023 55.9 60.0 60.7 62.4 67.5 22% 7% 1% 3% 8% 0% 5% 10% 15% 20% 25% 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Subscribers Subscriber growth (QoQ) Paramount Global Revenue and Adjusted OIBDA change Paramount+ Growth Paramount had a rocky year financially with significant losses in earnings in the first half of 2023 through restructuring and impairment charges • As cord cutting continued, TV Media revenue and profitability dropped • Filmed entertainment revenue and profitability also dropped due to impacts of the writers and actors strikes, and the underperformance of films like Mission Impossible compared to 2022’s Top Gun Maverick • DTC revenue dramatically rose and profitability improved through subscriber growth, ad revenue growth, increased engagement, and price increases (but not enough to offset losses in TV Media) Sources: Paramount Global 10k & Trending Schedules
  • 8. 8 AMC Entertainment Source: SEC Filings, Bloomberg, CNBC AMC is one of the largest theater operations around the world and through complete ownership, or partial, operate ~940 theaters with over 10,500 screens worldwide. The Company was founded in 1920.  The Company avoided bankruptcy during the COVID-19 pandemic when retail investors were bidding up shares, with an all-time high stock price of $551.38; The Company’s closing market price as of 4/05/2024 was $3.01  AMC’s $4.6bn debt load, disappointing financials and a long ways from pre- pandemic performance has led the Company’s senior creditors into discussions about the best capital structure solutions for The Company  Without a debt restructuring, The Company’s obligations will balloon in 2026 when $3bn comes due  On 03/28/2024, The Company said it could potentially sell up to $250m worth of stock; shares plunged 14% on the news 0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 2024 2025 2026 2027 2028 2029 Revolver 1L 2L Senior Sub. in $USD millions except attendance & screens 2020 2021 2022 2023 Revenue $1,242 $2,527 $3,911 $4,801 % growth 103.5% 54.8% 22.8% Net Gain/(Loss) (4,589) (1,269) (974) (396) Adj. EBITDA (999) (292) 46.6 425.8 % margin (80.4%) (11.6%) 1.2% 8.9% Free Cash Flow (1,303) (707) (831) (441) Attendance (thousands) 75,190 128,547 200,965 239,485 Average Screens (thousands) 5,049 8,998 10,118 9,850 - 2,000 4,000 6,000 8,000 10,000 12,000 FY2015 FY2016 FY2017 FY2018 FY2019 FY2020 FY2021 FY2022 FY2023 Theaters Screens 387 906 1,104 1,006 1,004 503 930 940 898 5,426 10,558 11,169 11,091 11,041 6,048 10,448 10,474 10,059 95% (45%) 73% $230 $98 $3,396 $525 N/A $950 Company Overview Financial Summary Maturity Schedule (in $USD millions) Theaters Operated vs. Screens Operated
  • 9. 9 Volatile sales process and share price for Paramount Global – Apollo 9.00 10.00 11.00 12.00 13.00 14.00 15.00 16.00 17.00 18.00 Paramount Global (NasdaqGS:PARA) - Share Pricing Apollo Global Bid Attempt 1 • March 20th : Apollo Global Management offers the board of Paramount Global $11 bn for Paramount Pictures • The bid did not include CBS/CBS networks (news and sports), streaming (Paramount+ and Pluto TV), and other media assets like BET, Showtime, and Miramax) • Apollo owns film studio/film financier Legendary entertainment and likely saw synergies in bringing together one of the largest studios/distributors with one of the largest film financiers • Our SOP valuation of Paramount Global we valued Paramount Pictures at a median value of $10.4bn so Apollo’s bid represented a 6% premium • After the stock price rose significantly on news of the bid, the gains were reversed when Shari Redstone quickly turned down the bid as she didn’t want to sell the company in parts Apollo Global Bid Attempt 2 • After Paramount Global’s debt was downgraded to below investment grade by S&P Global, it nullified the change of control premium that would have required an acquirer to refinance its debt (likely at much higher rates) • March 31st: This allowed Apollo to change its original bid (since Redstone made it clear that she didn’t want to sell the company in parts) to a bid for all of Paramount Global for ($26 bn): assuming $14 bn of Net Debt that would be close to $17 dollars per share • While a massive premium, Redstone again did not consider the bid as the bid lacked details and there are reports of her not wanting to give her family’s company over to private equity Apollo Global Media Investments Date Deal Size Legendary Entertainment (Film) Jan-22 $760m ($2-$2.5bn valuation) Yahoo (Web Services Provider) Sep-21 $5bn Cox Media Group Mar-19, Jun-19 $3.1bn, $500m+ WBD engages w/PARA on merger talks Skydance engages w/PARA on merger talks Byron Allen submits $30bn bid for whole Co. WBD halts M&A talks Apollo bids $11bn for studio, rejected by Redstone Apollo bids $26bn for WholeCo.; Redstone strikes tentative deal w/Skydance Sources: Hollywood Reporter, CNBC, Bloomberg, CapIQ, Variety
  • 10. 10 Volatile sales process and share price for Paramount Global – Skydance Class-A & B Transaction Structure Class-A (Voting Shares):  Skydance purchases Shari Redstone’s 77% stake in PARA’s Class-A voting- shares through NAI leading to $2bn in cash proceeds representing $30 per share, a 31.5% premium to the 4/10/2024 share price and a 10.2% premium to it’s 52-week high  Skydance would then own and control NAI and would have total voting control over PARA  Offer is subject to PARA’s board of directors guarantee with respect to a subsequent merger between Skydance and the remainder of PARA  NAI would use some cash to repay NAI obligations Class-B (Non-Voting Shares):  PARA would acquire SkyDance in an all-stock transaction valuing Skydance at $5bn (Skydance to own 45-51%)  NewCo. equity would be issued replacing old equity  Skydance and it’s backers RedBird, KKR, and Larry Ellison (Oracle) would infuse $2-3bn cash into the NewCo. shoring up the B/S and partly paying for itself  PARA film & TV studios and Skydance’s studio merge  David Ellison becomes new CEO; RedBird ex-media execs oversee different divisions of NewCo.  Company would look to sell off non- core assets like BET and Nickelodeon and would keep CBS  PARA+ would look for licensing deals/JV’s and will be kept by PARA *Tentative deal must now be approved by the Special Committee of the PARA board, not including Shari Redstone. Exclusive negotiations with Skydance end 05/03/2024 (four days after Q1’24 earnings). Turmoil with respect to the stock price has ensued due to the nature of the deal, with major shareholders implying a class-action lawsuit and board members resigning. * Pros & Cons of Skydance Transaction Pros: I. Other bids may not be “real”: I. Byron Allen’s company’s value is relatively small so financing a deal this size is likely unrealistic; similarly, Apollo’s bid appeared opaque and is much larger than the typical PE buyout II. Significant revenue & cost synergies and key talent: I. Redbird has former head of Warner Bros. Sports/CNN, & NBCU Jeff Zucker and Jeff Shell, former CEO of NBCU who would both lead NewCo II. Skydance has John Lasseter, the former head of Pixar who can help PARA compete with Disney on the animation front III. Skydance and PARA have previously co-produced notable films IV. In a world where many studios are unprofitable, Skydance has continued to be profitable behind the savvy David Ellison III. Larry Ellison/Oracle involvement I. Part of the deal would be granting Paramount access to Oracle’s advanced AI tech which could give it a major advantage in streaming Cons: I. Dilutive to shareholders I. Deal switched from PARA being acquired and taken private to PARA acquiring Skydance; even with a cash infusion there would be ~$2bn worth of dilution II. Complex structure I. Deal needs to go through several internal approvals, is far more complex than PARA originally thought and can serve as a distraction to management III. Rival Offers: I. Other offers serve the best interests of Class- B holders; PARA could have engaged with Apollo, an offer to buyout the entire firm and represented nearly a 45% premium for Class-B shares
  • 11. 11 TABLE OF CONTENTS Media & Entertainment 4-5 Current State of the Box Office I. 6-9 Paramount Transaction Update II. 10-13 AMC Entertainment III. 14-25 Sports Sector Update IV. 26-33 Gaming Sector Update V.
  • 12. 12 AMC Entertainment Leverage Profile Cap Table Total Liquidity Revolver Borrowing Capacity $225 Less: Amount Outstanding 0 Less: Letters of Credit Outstanding 0 Revolver Availability $225 Plus: Cash & Cash Equivalents $884 Total Liquidity $1,109 Corporate Rating Moody's Caa2 Standard & Poors (S&P) CCC+ Select Ratios Debt/EBITDA 26.4x Debt/Unlevered FCF 72.8x Net Debt & Pref./EBITDA 24.7x Net Debt & Pref./Unlevered FCF 68.2x EBITDA/Interest Expense 0.9x Unlevered FCF/Interest Expense 0.3x Debt/Book Cap. 125.3% Fixed-rate debt/Debt 79.2% Face Value 04/05/2024 Market Price 04/05/2024 Market Value 04/05/2024 Coupon Cash Interest Maturity Credit Ratings Face Market Cash & Cash Equivalents $884.00 NA $884.00 Senior Secured Revolving Credit Facility 225.00 NA 225.00 7.695% 17.31 Apr-24 Caa1/B- 8.443% Senior Secured Notes due 2026 1,920.00 83.750 1,608.00 8.443% 162.11 Apr-26 Caa1/B- 12.75% Odeon Senior Secured Notes due 2027 400.00 99.63 398.52 12.750% 51.00 Nov-27 B3/B 7.5% First Lien Notes due 2029 950.00 65.180 619.21 7.500% 71.25 Feb-29 Caa1/B- 1st Lien Secured Debt $3,270 $2,626 $284 7.7x 6.2x 10%/12% Cash/PIK Toggle Second Lien Notes due 2026 1,425.49 74.490 1,061.85 10.000% 142.55 Jun-26 Caa3/CCC- Total Secured Debt $4,695 $3,688 $427 11.0x 8.7x 6.375% Senior Subordinated Notes due 2024 5.03 96.05 4.83 6.375% 0.32 Nov-24 Ca/CCC- 5.75% Senior Subordinated Notes due 2025 98.32 82.05 80.67 5.750% 5.65 Jun-25 Ca/CCC- 5.875% Senior Subordinated Notes due 2026 51.50 60.13 30.97 5.875% 3.03 Nov-26 Ca/CCC- 6.125% Senior Subordinated Notes due 2027 125.47 50.00 62.74 6.125% 7.69 May-27 Ca/CCC- Total Debt $4,976 $3,867 $444 11.7x 9.1x Net Debt $4,092 Equity Value $777 Total Enterprise Value $4,869 Memo: LTM Adjusted EBITDA $425.80 Interest Coverage Ratio 1.0x Debt / LTM Adj. EBITDA Secured debt represents 94.4% of total obligations WACC Figures Z-Score: - .58 = >58% chance of bankruptcy; a Z- Score < 1.8 signals distress Cost of Equity 13.1% Cost of Debt 8.3% Weighted Average Cost of Capital 9.0% Source: SEC Filings, Bloomberg
  • 13. 13 AMC Entertainment – Leverage Outlook Market Liquidity Outlook AMC Financial Outlook AMC’s new equity distribution pact for $250m could prove to be a headwind as analysts expect AMC to lose nearly ($500m) in FCF in FY’24  Common stock dilution from the $250m stock sale ranges between 14.5% - 31.2%  The discouraging ($500m) in FCF is a byproduct of movie theaters having minimal operating leverage, with elevated fixed costs like rent providing a bleak earnings outlook; The Company expects to deploy $200m in ‘24 CapEx  Cash interest payments are likely to decline $44m vs 2023  Short interest as a percent of float stood near 15.2% as of April vs. 61.1% in December 2020  A stronger operational backdrop in 2025 could be a conducive refinancing environment  Management expects the domestic box office to increase by at least $1bn from this year’s $7.9-$8.1bn estimates  Consensus expects The Company to generate $5.1bn in revenue and $571m in Adj. EBITDA in FY’25  It’s very unlikely that retail investors pump the stock price as we saw in 2021 with the AMC frenzy AMC $250m Equity Distribution AMC Common Shares Outstanding 263.30 Employee Incentive Reserve 0.437 Total AMC Common Shares Outstanding & Reserved Pre-Sale 263.74 Shares Needed to Meet $250m Assuming Last Share Price (4/8/2024) 84.75 Shares Needed to Meet $250m Assuming Average Trailing 6-Month Price ($6.54) 38.23 Total AMC Common Shares Outstanding and Reserved Post ATM 301.96 - 348.48 Total AMC Common Shares Authorized 550 Total AMC Common Shares Post Equity Raise 201.52 - 248.04 For the first time in > two decade, it’s now cheaper to sell shares than to issue debt securities  What used to be a no-brainer – issuing debt – is now more of a calculated decision and with all-time stock prices for some and periods of distressed for others, has led companies to raise equity through the capital markets  In the past two years, companies in the S&P 500 have seen the cost of equity fall a little over 4%  On the contrary , issuing debt in the bond market– for US investment-grade companies – has doubled in the past two years to around 5.5%  However, there continue to be plenty of options in the private markets such as private credit JP Morgan expects a “structurally higher” equity supply on the horizon, with an increase of $360bn globally this year in net supply (400) (200) 0 200 400 600 800 2004 2023 Source: SEC Filings, Bloomberg
  • 14. 14 TABLE OF CONTENTS Media & Entertainment 4-5 Current State of the Box Office I. 6-9 Paramount Transaction Update II. 10-13 AMC Entertainment III. 14-25 Sports Sector Update IV. 26-31 Gaming Sector Update V.
  • 15. 15 Bundesliga Media Rights Deal – Proposal Sources: Bloomberg, Reuters, Forbes, The Athletic Context  The Deutsche Fussball Liga (the “DFL,” who oversee Bundesliga and 2. Bundesliga) is exploring a partial sale of its TV income rights for a cash injection of around €1bn  This would allow private equity firms to invest in the DFL and sell at a higher value  The DFL holds stable TV broadcast figures, a media deal renewal in 2025, and the highest average game attendance in world soccer (42,966)  DFL officials want German soccer to increase and diversify future revenue streams  This includes increasing the DFL’s foreign marketing presence and creating a dedicated streaming service for Bundesliga and 2. Bundesliga games  Some other potential increases in viewership and revenue have been rejected due to concerns over fan reaction  Changes to kickoff times and fixture location  Increased media access to teams (like All or Nothing or Hard Knocks) Timeline  May 2023: 36 clubs (the “German Clubs”) in the Bundesliga and 2. Bundesliga fail to get a two-third’s majority vote to sell 12.5% of the league’s media distribution rights at a valuation that could reach €16bn  December 2023: The German Clubs approve a revised proposal that would lead to a bidding process aimed to inject €1bn into the Bundesliga for as much of 8% equity of their TV rights. It is rumored that the bidding process started with four private equity firms preparing offers for the media rights  February 2024: CVC Capital Partners is revealed as the last remaining candidate in the bidding process after Blackstone announced that it had exited negotiations. A decision is expected by the end of March, and fan protests are expected throughout the nation €.5bn €1.bn €1.5bn €2.bn €2.5bn €3.bn €3.5bn Premier League (England) La Liga / La Liga 2 (Spain) Serie A / Serie B (Italy) Bundesliga / 2. Bundesliga (Germany) Ligue 1 / Ligue 2 (France) International Domestic Average Attendance of Major European Soccer Leagues Major European Soccer League Broadcasting Revenue per Year
  • 16. 16 Bundesliga Media Rights Deal – Fan Backlash and Cancellation Sources: Forbes, SBJ, The Athletic Criticism Over Deal Strategy  Critics of the proposal take issue with the distribution of capital to member clubs; 80% of funds are allocated to the Bundesliga, and within the first division, the distribution scale is greatly in favor of the most successful clubs within the league, which will, in theory, reduce competitive balance within German soccer  Others are unsure whether the hoped-for growth will be enough to offset the loss of media distribution rights over the next 20 years  Supporters of German soccer are fearing that CVC’s investment into DFL media rights after similar investments in rival leagues could represent a conflict of interest Fan Protest  Cultural Significance of German Soccer:  Fan affiliation is strongly determined by the community and historic values of the club  German Soccer fans see the entrance of private equity firms like CVC as surface-level cash injections at the expense of the uniqueness of German soccer culture Historic Context of Germany’s “50+1” Rule:  Historically, German teams were not-for-profit organizations run by members' associations, and until 1998 private ownership of any kind was prohibited  Today, it is still very likely that a club is >95% owned by club members  Member-led clubs prioritize low levels of debt, stable operating expense and cheap ticket prices; the Private Equity operating model is incompatible with these beliefs Protests:  This month, many games across the DFL were delayed/suspended after various forms of fan protest over the proposed media rights deal with CVC  As suggested, these concerns were mostly over the potential loss of the community- based culture and against the potential of reckless spending by the DFL and clubs Cancellation  On February 21, it was announced that the DFL would not continue in its plans to sell a stake in its media rights business to CVC following supporter protests  The DFL said continuing with negotiations was impossible as protests were increasingly jeopardizing match operations, schedules and integrity of the game  Additionally, there was a concern that the agreed-upon deal would lack broad acceptance from all clubs and supporters  At the moment, there are no plans to reopen negotiations or to restructure the deal, and no new bidding parties are expected to approach the DFL for their media rights Club Member Ownership Outside Investment Ownership Structure (in % of overall ownership)
  • 17. 17 Bundesliga Media Rights Deal – Deal Structure Sources: Bloomberg, Forbes, The Athletic, Statista, Bundesliga Structure and Factors Deal Structure:  DFL will set up a separate holding company which will hold their TV rights; the winning bidding party will invest capital into this vehicle, effectively giving them ownership of voting shares that control strategic media and marketing-related activities. DFL’s originally planned on a €2bn cash injection in exchange for a 12.5% equity stake in the new HoldCo, which would operate for the next 20 years. The revised deal now revolves around a €1bn cash injection, with the equity stake being the new central variable in negotiations  Deal is comparable to recent media rights transactions: last year, CVC purchased 15% and 8.25% of Ligue 1’s and La Liga’s media rights for €1.5bn and nearly €2bn, respectively Intended Uses of Funds  40% of new funds will be spent on “digitalization and internationalization” of the leagues, including a new streaming channel, 45% will be allocated to club infrastructure budgets (stadiums, training and youth facilities), with the final 15% given to clubs for operating expenses. The allocation of funds to clubs will be decided using the existing distribution model German Soccer Considerations  DFL’s desire for this unique deal structure is due in part to the particularly high regulatory barriers to direct investments into individual clubs. German clubs are required by law to have 50% of voting shares, plus one additional share, owned by members of the club. This “50+1 rule” guarantees majority ownership to club members and, in turn, reduces financial risk at the expense of reduced profits  The idea of the DFL taking out debt to finance these operations has been proposed, but the Bundesliga has stated that it would not be responsible measure to place debt on their member clubs. Additionally, the idea of an equity investment is welcome to increase their marketing capabilities and international private equity connections Revenue / Viewership Viewership per season Total TV rights International TV rights Domestic TV rights Current Deal: Last Year Current Deal: First Year League 16.0x 200.26mm 3200mm 1450mm 1750mm 2024/2025 2021/2022 Premier League 14.9x 114.38mm 1700mm 710mm 990mm 2026/2027 2022/2023 La Liga 12.2x 92.148mm 1120mm 200mm 920mm 2023/2024 2020/2021 Serie A 15.7x 81.5mm 1280mm 180mm 1100mm 2024/2025 2021/2022 Bundesliga 12.2x 54.1mm 662mm 80mm 582mm 2023/2024 2021/2022 Ligue 1 Comparable Valuations
  • 18. 18 Announcement of Sports Streaming App Between Fox, ESPN and Warner Brothers Sources: WSJ, CNBC Background  Fox, ESPN and Warner Brothers Discovery are teaming up to create a sports streaming application that will centralize their contracted media rights for North American sports onto a single platform, and will be offered directly to consumers  The new arrangement will effectively centralize around 55% of North American sports rights, and will include popular sports TV networks such as ESPN, TNT and Fox Sports 1, among others  The three parent companies will split ownership evenly over the new IP  Price points for the application have yet to be announced, but are expected to be lower than typical cable sports bundles, which often exceed $100  It is expected that current subscribers of streaming services—including Disney+, Hulu and Max, which are owned by the companies in the new streaming agreement— will have the ability to subscribe to the new service as part of a discounted bundle Commentary League Reactions  Delicate relationships between sports leagues and media networks will be tested; the streaming service has been long discussed internally, but it was reported that most sports league executives were blindsided by the news and not informed directly from the media networks themselves  This is particularly important given the current negotiations over media rights between the NBA and both Warner Brothers Discovery and Disney, who owns ESPN  There is an internal fear from sports leagues that these alliances between major media networks could cultivate a collusive relationship and hinder future media rights negotiations Media Trends  This deal could represent a shift in sports media distribution strategy; historically, companies have been hesitant to offer their most-valuable sports properties—such as NFL, NBA and MLB games—outside their respective high-price traditional cable package. This has made watching sports exclusively on streaming platforms particularly complex  However, with the acceleration of cord-cutting (recent estimates suggest an annual decline of 7% for traditional TV), media companies are seeing the writing on the wall and are shifting their focus to the streaming world  There are risks to decentralized ownership over streaming services; Disney is currently experiencing difficulties in their attempt to buy Comcast out of its joint ownership over Hulu $12.9bn $28.0bn $13.2bn Fox Disney Warner Brothers Estimated Value of Sports Steaming Service Offerings
  • 19. 19 Estimated Sports Streaming Market Share Post-JV Sources: ESPN Press Release 20% 30% 14% 12% 10% 7% 7% Cable/Satellite ESPN+FOX+WB Peacock TV YouTube TV Apple TV Sling TV Fubo TV
  • 20. 20 Super Bowl LVIII Viewership Review Sources: CNN, Forbes, SportsMediaWatch.com Summary  Super Bowl LVIII, which saw the Kansas City Chiefs defeat the San Francisco 49ers in overtime, was registered as the most watched Super Bowl in history  The game averaged 123.4 million viewers, surpassing the record set last year of 115 million viewers  The game approached the all-time most watched television broadcast in US history, which was the 1969 Apollo 11 moon landing viewed by an estimated 125 to 150 million viewers  The broadcast was hosted CBS and simulcasted on other services offered by Paramount Global, which include Paramount+, Univision and Nickelodeon  Advertising revenue continued to rise at a strong and steady rate; it is estimated that $650mm was spent on advertisements this year, up from $600mm representing an 8.3% annual increase Viewership Demographics  The increase in viewership is likely due to several factors; the game was considered a competitive matchup between teams of equal strength, and featured some of the games most marketable players like Patrick Mahomes, Christian McCaffrey, Brock Purdy and Travis Kelce, who all rank in the top ten of NFL jersey sales  The game’s viewership was further boosted by the attendance and heightened interest surrounding musician Taylor Swift  The pop superstar began attending Chiefs games in October due to her ongoing romance with tight end Travis Kelce  NFL and media executives have publicly acknowledged that her presence has been followed by an increase in viewership in both younger and female demographics, helping the NFL tap into additional viewership markets $322 $376 $430 $341 $339 $449 $545 $578 $600 $650 -20% -10% 0% 10% 20% 30% 40% 300 400 500 600 700 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Advertising Expenditure (in $ mm) Total Expenditure Growth rate 123.7 115.1 112.3 101.6 118.5 100 105 110 115 120 125 SB LVIII (2024) SB LVII (2023) SB LVI (2022) SB LV (2021) SB LIV (2020) Average Super Bowl Viewership (in millions)
  • 21. 21 Lewis Hamilton – Ferrari Deal Sources: Forbes, CAR Magazine, Fortune $330 $340 $350 $360 $370 $380 $390 $400 $410 $420 $430 150k 350k 550k 750k 950k 1,150k 1,350k 1,550k 1/2/24 1/9/24 1/16/24 1/23/24 1/30/24 2/6/24 2/13/24 2/20/24 2/27/24 Summary Formula One (“F1”) driver Lewis Hamilton announced that he will leave the Mercedes-AMG Petronas F1 team after eleven years via a release clause in his current contract. Hamilton, considered the sport’s most famous driver, will join Scuderia Ferrari in 2025. Driver Accomplishments:  Most successful driver in history with 103 wins and 104 pole positions  7-time F1 world champion (matched only by one driver in F1 history)  In 2023, Hamilton finished 3rd in the driver championship standings Fallout:  Ferrari’s move to join Lewis Hamilton with Charles Leclerc (5th place overall in 2023) will challenge Red Bull’s recent dominance over F1  Last year, Red Bull won 21/22 Grands Prix, breaking the all-time F1 team record for highest percentage of Grand Prix wins in a season at 95.45%  Hamilton’s fame, which was boosted after the emergence of Netflix’s Drive to Survive, will stir interest in the sport and affinity towards Ferrari’s F1 team Commentary Comparison to Hamilton – Mercedes deal in 2013:  In 2013, Hamilton’s move from the frontrunning McLaren to a competitive Mercedes team was a signal of confidence for the automaker’s quality; 2013 represented an increase in Mercedes’ market capitalization from $58.4bn to $98.2bn, compared to an estimated growth in market capitalization for comparable automakers of 30% during the same year  Hamilton’s six championships over the next eight seasons gave the Mercedes F1 team unforeseen prize money and sponsorship revenue; between 2013 and 2023, the value of Mercedes’ F1 team rose from $400mm to $3.8bn, making them the second most valuable F1 team  Additionally, Hamilton’s association with Mercedes Benz increased the automaker’s brand awareness on an international stage and gave them a positive marketing resource Affect on Ferrari Share Price:  Upon the news release, Ferrari’s share price experienced a 12.6% intraday increase in valuation and nearly 5x the trading volume of comparable days surrounding February 1  Not only does Hamilton’s signature signify Ferrari’s strong financial health, but it also gives the brand a larger international presence and reassures the quality of their products Single-day share price increase of 12.6% on 2/1/24, trading volume 4.86x higher than usual
  • 22. 22 PGA Third-Party Investment Sources: Bloomberg, Forbes, PGA, USA Today, The Athletic Commentary Summary:  The Strategic Sports Group (“SSG”), a consortium highlighted by Fenway Sports Group and various US-based sports franchise owners, announced that it has created PGA Tour Enterprises and would invest up to $3bn into the sport  The deal structure includes an initial investment from Strategic Sports Group of an initial investment of $1.5bn and will rise to $3bn with an option for future inclusion from the LIV golf, which itself is financially backed by the Saudi Arabian Public Investment Fund (“PIF”), a sovereign wealth fund  This comes as a surprise after the June announcement that highlighted the potential merger between the PGA and LIV golf, but this potential merger has been slowed by legislative roadblocks and split public opinions on the ramifications of said merger Potential Structural Changes:  The deal centers around the creation of a new for-profit entity, PGA Tour Enterprises, that will allow nearly 200 PGA Tour members the opportunity to gain equity in  PGA Tour Enterprises is also considering reallowing participation for golfers who had previously joined LIV Golf or joined the PGA Tour from the collegiate level Other Considerations:  The deal and subsequent change to a for-profit operating model would represent a significant change in the operating structure of the league  The PGA tour has historically placed a strong emphasis on charity fundraising and, with rare exception, requires all Tour events to be non-profit  Proposed structural changes could jeopardize the Tour’s tax-exempt status  Potential future collaboration with the PIF could be complicated given the previous difficulties passing legal scrutiny, including antitrust laws  Additionally, the previously-set December 31 deadline to come to a definitive agreement with LIV Golf has been extended, but any PIF inclusion is expected to take considerable time to approve $750mm $75mm $75mm $30mm $600mm Top 36 golfers based on career performance (weighted towards the previous five seasons) and Player Impact Program results Top 64 golfers (based on the previous three seasons) 36 golfers considered to be "instrumental in building the modern PGA Tour" (based on career performance)  Fenway Sports Group (Boston Red Sox, Pittsburgh Penguins, Liverpool FC, + others)  RedBird Capital Partners (AC Milan + others)  Mark Attanasio (Crescent Capital, Milwaukee Brewers, Norwich City FC)  Arthur Blank (co-founder of Home Depot, Atlanta Falcons, Atlanta United + others)  Steve Cohen (Point72, New York Mets)  Wyc Grousbeck (Boston Celtics)  David Moross (HighPost Capital)  Mark Bezos (HighPost Capital)  Marc Lasry (Avenue Capital, Milwaukee Bucks)  Tom Ricketts (Incapital, Chicago Cubs) Strategic Sports Group: Notable Investors Use of Funds From Initial $1.5bn Investment
  • 23. 23 US Sports Streaming Market • Over half (51%) the Americans have made the switch to streaming-only sports viewing Most Popular Sports League to watch • A majority of Americans (87%) are watching live sports through some cable or streaming package Sources: GlobalMarketEstimates, Reviews.org 65% 51% 42% 30% 25% 24% 20% 17% 17% 13% 12% 12% 12% 11% 11% 10% 9% 9% 8% 0% 10% 20% 30% 40% 50% 60% 70% Football, NFL Basketball, NBA Baseball, MLB College Football, NCAA College Basketball, NCAA Auto racing, NASCAR Hockey, NHL Auto racing, F1 Combat Sports, UFC Combat Sports, Bellator MMA Basketball, WNBA Soccer, MLS Basketball, NBA G League Auto racing, IndyCar Combat Sports, WWE Golf, PGA Basketball, WNBA Combat Sports, AEW Combat Sports Boxing, WBA % of Americans watching Live Sports Most Popular On-Demand Streaming Service 51% 45% 33% 26% 19% 16% 7% 0% 20% 40% 60% Prime Video ESPN+ Peacock Paramount Max Apple TV % of Americans streaming their sports on Others
  • 24. 24 Dyal Capital Partners with Lore and Rodriguez to Secure Ownership of Minnesota Timberwolves, Expanding NBA Portfolio Deal Content Timberwolves' Current Valuation and Performance:  The Minnesota Timberwolves, valued at $2.8 billion, are having a successful season with a record of 47-22  Despite challenges with funding rounds, Lore and Rodriguez have managed to progress with the deal initiated in 2021 when Glen Taylor agreed to sell the team at a $1.5 billion valuation Partnership with Dyal Capital:  Marc Lore and Alex Rodriguez partnered with Dyal Capital to finance the transaction to become controlling owners of the Minnesota Timberwolves(NBA) and Minnesota Lynx (WNBA) Dyal Capital's NBA Team Portfolio:  The fund has minority stakes in the Atlanta Hawks, Sacramento Kings, and Charlotte Hornets.  Dyal previously held a stake in the Phoenix Suns before exiting when Mat Ishbia purchased the team for $4 billion Expansion of Dyal's Portfolio:  Dyal's investment in the Timberwolves marks its fourth NBA team ownership, showcasing its initiative to diversify its portfolio within the sports industry Sources: Sportico, Forbes A-Rod & Marc lore purchased 40% Stake for $600 million at $1.5 billion valuation A-Rod & Marc Lore purchase 40% Stake financed by Dyal capital becoming majority owners $0.00 $500.00 $1,000.00 $1,500.00 $2,000.00 $2,500.00 $3,000.00 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 80.00% 20% New Ownership Structure Marc lore & A-Rod Glen Taylor
  • 25. 25 Dyal Capital Partners with Lore and Rodriguez to Secure Ownership of Minnesota Timberwolves, Expanding NBA Portfolio Commentary Sources: Sportico, Forbes  The partnership between Marc Lore, Alex Rodriguez, and Dyal Capital reflects a strategic move to secure ownership in a successful NBA franchise like the Minnesota Timberwolves  The valuation of the Timberwolves and their current performance add value to the deal, indicating potential growth and profitability for the new ownership group Charlotte Hornets Minnesota Timberwolves Sacramento Kings Atlanta Hawks Dyal Capital NBA Portfolio Deal Update  Glen Taylor, the current majority owner of Timberwolves & lynx, confirmed the expiration of Marc Lore and Alex Rodriguez's option to acquire a controlling interest in Timberwolves and Lynx.  The purchase agreement required the closing to occur within 90 days of Lore and Rodriguez's exercise notice, which expired on March 27, 2024
  • 26. 26 TABLE OF CONTENTS Media & Entertainment 4-5 Current State of the Box Office I. 6-9 Paramount Transaction Update II. 10-13 AMC Entertainment III. 14-25 Sports Sector Update IV. 26-33 Gaming Sector Update V.
  • 27. 27 Integration Risks: The integration of Jackpocket into DraftKings' ecosystem may present challenges, including aligning company cultures, integrating technology platforms, and managing operational costs Regulatory Hurdles: Despite the low political barriers to Jackpocket's business model, the broader regulatory landscape remains complex Market Reaction: The sports betting and iGaming platform’s shares wobbled in post-market trading, falling as much as 10% due to DrafKings reporting quarterly revenue that was up 44% but still missed analyst estimates Draftkings Acquires Jackpocket $44.57 $41.49 $38 $39 $40 $41 $42 $43 $44 $45 $46 Draftkings Stock Reaction  DraftKings' decision to acquire Jackpocket for $750 million, paid in 55% cash and 45% stock, is a strategic endeavor to tap into the burgeoning digital iLottery market This acquisition is expected to bolster annual revenue by approximately $340 million, showcasing the company's push for diversification and market dominance  With Jackpocket's established presence in the lottery space, being the largest seller of lottery tickets in New York, DraftKings is set to redefine the gaming landscape Overview DraftKings Stock Reaction Diversification: Bolsters market efficiency and customer offerings, akin to the leverage gained from its fantasy sports database, by introducing new products that enhance customer acquisition and lifetime value in the sports betting and online gaming sectors Scope Expansion: Ability to cross-sell the Jackpockjet audience to OSB and online casinos. Jackpocket’s political hurdles offer a seamless expansion path compared to traditional iLottery initiatives. Secures a foothold in iLottery growing at 15x the broader US lottery market Strategic Partnerships: The deal also opens doors to strategic partnerships, evidenced by Jackpocket's collaboration with the NHL’s New York Islanders Synergies Challenges Multiple LTM Rev Implied EV Stake Buyer Target Announced 9.7x $78mm $758.05mm 100% DraftKings Jackpocket Feb-15-2024 1.9x 152.5 290.8 51% Flutter Max Bet Sep-27-2023 6.3x 142.1 892.1 100% Entain STS Holding Jun-13-2023 8.1x 80 647.9 64% PENN Entertainment Barstool Sports Aug-17-2022 1.5x 414.1 630.2 100% MGM LeoVegas May-01-2022 1.8x 1,510.9 2,677.1 100% 888 Holdings William Hill Sep-09-2021 7.0x 60.9 425.0 96% Entain Enlabs Jan-07-2021
  • 28. 28 Roblox: The platform reports over 71 million daily active users, a 22% year-over-year increase, and $750 million in quarterly revenue, up 30%. Roblox is expanding its demographic, increasingly engaging users over 13 while retaining its younger audience Disney Stake in Epic Games On February 7, The Walt Disney Company acquired a $1.5 billion stake in Epic Games, aiming to integrate its extensive portfolio of characters and stories into Epic's digital platforms, and represents Disney's most significant investment in the gaming sector to date.  Aim to capture the attention of 3.3 billion consumers, especially younger generations and the 100+ million new gamers entering annually  Importance of Gaming for IP Holders: Gaming captures significant consumer time; Disney CEO Bob Iger highlights its equal or greater appeal compared to movies and TV for some demographics  Creating a Virtual Disney Theme Park: Disney aims to create a virtual theme park with Epic Games, blending nostalgia with modern gaming experiences and integrating extensive Disney IPs  Impact on User-Generated Content (UGC): This move is part of a broader trend of IP owners exploring partnerships in the UGC space, particularly with Roblox and Unreal Editor for Fortnite Disney's investment is poised to further fuel the growth of the UGC vertical, highlighting the unique development paths of leading UGC platforms  As intellectual property (IP) increasingly enters the gaming sector, the owners of these IPs are dedicating significant efforts to form partnerships and integrate with the top entities in the User-Generated Content (UGC) domain: Roblox and UEFN (Epic Games) Opportunities Two Giants within UGC Epic Games has seen a valuation of $22.5 billion after Disney's $1.5 billion investment. Epic recently introduced UEFN, a direct competitor to Roblox, offering a higher revenue share to creators at 40%, compared to Roblox's 24-29% 21.3 24.5 23.1 23.6 25.5 24.2 26.4 26 28.7 28.2 29.7 29.3 20.5 21.4 23.8 25.6 28.9 27.7 31.9 32.4 36.9 36.8 40 41.4 41.8 45.9 46.9 49.2 54.4 51.9 58.3 58.4 65.6 65 69.7 70.7 1Q21 2Q21 3Q21 4Q21 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 3Q23 4Q23 Roblox - Daily Active Users by Age Group (millions) +102% +50% Over 13 years old Under 13 years old
  • 29. 29 Indie Games in 2024 In 2024, indie titles like Palword ($6.75 million budget surpassing 25 million units sold), Granblue, and Last Epoch are among the top ten highest-grossing games on Steam. This dominance is part of a decade-long increase in indie games' market share, with indie games accounting for 31% of all Steam revenue in 2023, up from 25% in 2018 Unprecedented Success Drivers 35% 36% 35% 44% 38% 29% 47% 25% 27% 28% 30% 32% 31% 43% 20% 30% 40% 50% 2018 2019 2020 2021 2022 2023 2024 Indie Game Revenue on Steam Indie Game % Games > $10M Rev Indie Games as % of Steam Rev 78% 78% 76% 79% 74% 74% 67% 70% 72% 72% 73% 72% 65% 70% 75% 80% 2018 2019 2020 2021 2022 2023 Steam Games Rating by Publisher Classification Paid AAA Paid Indie  Shifting Gamer Preferences: The movement towards indie games reflects a broader dissatisfaction with the AAA sector's lack of innovation, marked by a prevalence of sequels and remakes. This sentiment is captured in industry commentary highlighting the fresh and inventive experiences offered by indie  Indie vs. AAA Quality Parity: Indie and AAA games are now nearly equal in average Steam ratings, demonstrating that indie games can compete with AAA titles in player experience despite often lacking in graphical fidelity and complexity  Democratization of Development Tools: Advances in game development tools like Unreal Engine and Unity have lowered barriers to entry for indie developers, enabling them to focus on creativity and storytelling. This trend is complemented by platforms like Steam, which revolutionize game distribution Market Share Success Amid AAA Releases Despite the high volume of blockbuster AAA titles in 2023, indie games have maintained their revenue share on Steam. The expected drought in AAA releases in 2024 is likely to further boost indie games' prominence on Steam charts. Indie and AAA games are also now nearly equal in average Steam ratings
  • 30. 30 Impact of the EU Digital Markets Act (DMA) on Software Purchases What is the Digital Markets Act?  Passed by the European Commission in March of 2022, the Digital Markets Act sought to make consumer software purchases fairer and more contestable  Specifically, it outlines monopolies in the market (known as ”gatekeepers” who provide core platform services must comply with key obligations and prohibitions  The act forces significant fines (upwards of 10% of a platform’s annual turnover) in the event a company is found to be responsible for ‘gatekeeping’ equal accessibility to all developers and software products  Applies to companies with annual turnover over $7.9bn, market value over $79bn, and active user base of over 45mm in the EU  Upcoming deadline of March 6, 2024 for companies to comply for face fines Implication for US Software Marketplaces  Companies with established software product portfolios will be incentivized to develop competing platforms for specific application markets  Yet as the law is enforced in the EU, US regulators and lawmakers may seek similar enforcement mechanisms to control monopolistic software platforms  Smaller developers with tighter budget constraints may garner more visibility as in-store marketing skews away from larger developers Companies Identified as ‘Gatekeepers' DMA Enforcement Timeline Mar ‘22 •Political Agreement on DMA May '23 •DMA rule application and enforcement Sep '23 •Designation of 'Gatekeepers' Mar '24 •Fines and Penalties levied to 'Gatekeepers'
  • 31. 31 2024 Revenue Outlook  Negative expectations for forecasted 2024 revenue growth in the PC market due to:  lack of strong game releases compared to 2023  loss of PC market share due to the popularity of gaming consoles (Xbox, PlayStation)  continued price pressure from freemium and discounted games  Despite the downturn, PC games market is expected to grow (2025-2028) as longer-term trends take over:  Continued growth of Steam as a platform for developing geographies and markets  Increased gamer appetite for indie releases exclusively on PC  Addition of traditionally console-only titles to PC platforms Key Strategies  Sports-related games (FIFA, NBA 2K, etc.) have adopted steeper discounting strategies during seasonal purchasing periods  Microtransactions (MTX) were a popular monetization strategy until 2023, with the trend reversing course in favor of larger in-game transactions  Top games in the PC market lack free-to-play models and instead focus on multiplayer/co-op formats Top Trends in PC Gaming  The top 100 released games accounted for 91% of total revenue while the remaining 13,871 games contributed 9%  Lack of Microtransactions in newly released games in 2023 continues into new releases for 2024  Indie developers (groups/developers from 1-16 people) carry significant attention due to blockbuster releases in 2023 PC Gaming Outlook 9 8.8 9.2 10.2 10.9 11.5 0 2 4 6 8 10 12 14 2022 2023 2024E 2025E 2026E 2027E Steam Market Revenue Forecast (2022-2027) Full Game Sale Revenue ($bn)
  • 32. 32 Key Drivers  Widens the potential user base as gamers don’t need expensive console or PC gaming hardware to access AAA and mainstream game titles  Fast adoption of 5G and fiber optic internet technology decrease barriers to entry for internet requirements that allow cloud gaming services to compete with hardware offerings  Major players like NVIDIA (GeForce Now), Boosteroid, and Microsoft (Xbox Cloud Gaming) both a) invest heavily in cloud hardware capabilities in data centers and hosting technology and b) integrate popular titles to attract a wide user base to switch from traditional gaming setups  Decrease in last-mile packet loss rates, alleviation of network congestion, and lower latency rates have brought the offering closer to the traditional hardware experience Video Streaming vs File Streaming  The video streaming segment is more reliant on cloud-based technology as the majority of computational power is centralized at a data center  As a result, it’s the most popular cloud streaming solution and is expected to grow at a CAGR of 46.20%  The file streaming market requires higher barriers to entry for consumers (requiring computational power to run the game off-site) and is less popular with gamers as an alternative to traditional gaming hardware solutions Key Markets & Demographics  The Asia-Pacific region (CAGR 44.50%) is the most significant in the global cloud gaming market, with China driving expansion with new technology integration and capabilities  The North America region lags behind the Asia-Pacific region in market share yet is slated to grow at a CAGR of 43.5% due to the significant adoption of data centers and media services Cloud Gaming Outlook 0.9 1.4 2.2 3.3 4.6 5.9 32.0 31.2 36.3 47.1 61.7 76.7 0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 2022 2023 2024E 2025E 2026E 2027E Forecasted Cloud Gaming Market Revenue & ARPU Revenue (in $bn) ARPU (in $)
  • 33. 33 Mobile Gaming Outlook Advertising and Monetization Revenue  Mobile developers are finding ways to monetize key user bases as ARPDAU (avg revenue per daily active user) is down 13% since 2022  Loss is driven by a decrease in IAP (in-app purchases) while IAA (in-app advertising) increased by 26.7%  Subsector gains are most evident in simulation, casual, and puzzle games that capitalize on in-game advertising  Diversification in advertising strategies is shown to increase daily engagements as developers are integrating ads with in-game monetization (Offerwalls)  The adoption of piggy banking in-game currencies entices users to actively seek advertising offerwalls and increase per-advertisement revenue Platform Diversification  Smaller studios that dominate the mobile market have increased multiplatform game development by 71% over the past 2 years  34% increase in games launching on three or more platforms between 2022 and 2023  Mobile and desktop are the most popular platforms for studios of fewer than 50 people  RPG (role-playing games) lead in multiplatform development, while multiplatform engagement is a key factor in video game design 23% 9% 6% Developer Game Development Pipeline Multiplayer Singe-player (network gameplay) Single player (no network gameplay) Couch co-op 62% Emphasis on Multiplayer Gaming  Mobile-only games featuring multiplayer functionality on average had 40.2% more monthly active users compared to those without  As a result, developers have increased their development pipeline compared to single-player games  Multiplayer gaming revenue is expected to grow 7% following 2023 growth of 10%, creating a TAM of $2.3Bn
  • 34. CONFIDENTIAL WALL STREET MASTERMIND For questions on material please reach out to lambertjagger@gmail.com or jamesconcepcion217@gmail.com Contributors | Group Head Jagger Lambert | Group Head James Conception | Research Analyst Joe Possumato | Research Analyst Joe Liu | Research Analyst Nolan De Jesus | Research Analyst Virat Mogli