Media entrepreneur Byron Allen has been making ambitious acquisitions for some time and, buoyed by a recent billion-dollar corporate refinancing, he’s hungry for more.
Since last year, Allen’s Century City-based media company Entertainment Studios has bought 16 TV channels serving small and medium-sized markets for $500 million, and the company has acquired another TV channel this month.
The frenzy follows the company’s acquisition of basic cable television network The Weather Channel for $310 million in 2018.
In addition to its acquisition activity, Allen in June reached a carriage agreement for its cable networks with Comcast Corp., resolving a case that had reached the United States Supreme Court. And last summer, Allen personally invested in Sinclair Broadcast Group Inc.’s $10.6 billion deal to buy 21 regional sports networks formerly owned by 21st Century Fox.
Allen – who first rose to fame as a teenage comedian and co-host of a hit NBC series in the late 1970s – launched what is now known as Entertainment Studios in 1993 .
Today, the company has an estimated annualized revenue of $600 million and has 1,300 employees. Entertainment Studios is under its Allen Media umbrella.
“We see ourselves as a private equity firm that acquires media assets that can work together” producing synergy and growth, Allen said in an interview. “And we’re on an acquisition track.”
In February, in a move that received little press attention, Entertainment Studios closed a major refinancing.
Institutional investors bought $660 million of first lien, a senior B secured term loan and a $300 million unsecured note. Over the past 12 months, RBC Capital Markets has provided M&A advice and arranged financing for Allen Media.
Allen’s company also has a $60 million revolving line of credit.
The debt maturities extend from 2025 to 2028, giving Allen some breathing room. Allen Media’s debt is rated by corporate credit agencies in the speculative range, though stable and improving.
Allen said EBITDA cash flow was about $300 million a year and he valued the business at billions of dollars in the single digits, using standard cash flow multiples for media companies. .
Tuning to TV channels
TV stations, though experiencing economic erosion in recent years, are being swept up in merger and acquisition activity, thanks to improving finances thanks to rising cable fees. This makes it a priority for other entertainment studio acquisitions.
Allen’s primary focus is on affiliates of the big four television networks — his company’s 16 television stations all fall into this category — but the company also pursues digital media.
Existing operations include 24-hour streaming video/cable TV channels (Comedy.TV, Recipe.TV, Pets.TV, Cars.TV and others) and movies, including theatrical distribution, which is one of the most lucrative parts of the film. business.
In addition, Entertainment Studios operates television production and syndication businesses (shows include “Comics Unleashed”, “Entertainers with Byron Allen” and court shows, such as “Justice With Judge Mablean”) and digital media.
The company’s various businesses “benefit from a capex-lite business model, producing good liquidity and cash flow,” Moody’s Investors Service Inc. wrote in February.
Although the bulk of the company’s assets are traditional media, digital entertainment platforms are the hot spot in the industry and they often boast exorbitant valuations.
Entertainment Studios has made a digital foothold, creating the Local Now app, which Allen describes as “a combination of local news meets Netflix for free,” due to its ad-supported revenue model.
The company’s black-focused video-centric digital platform, TheGrio, has seen its audience grow from less than 1 million monthly active users when it was purchased in 2016 to more than 10, 5 million monthly users today.
Allen posted a personal manifesto on TheGrio in June about the National Dialogue on Race titled “Black America Speaks. America should listen,” which called for specific action on six fronts.
Speaking at the July 30 Black Business Matters webinar hosted by the Los Angeles Business Journal in partnership with the African American Chamber of Commerce of Greater Los Angeles, Allen expressed his frustration with traditional financial institutions and their black lending practices.
While lenders boast of generously financing “minorities,” Allen countered that they cater primarily to the female population. “If you look deeper, they don’t lend money to African Americans, which is why our ownership is weak and our businesses are not properly capitalized with capital that is not predatory,” he said. -he declares.
Allen feels personally touched by access to funding. In its early days, he said, his company was forced to sell debt contracts to high-cost financiers despite advertising deals with blue chip advertisers. “I’m not looking for handouts,” Allen said. “I have never sought alms in my 59 years on this planet. I only seek a fair opportunity, but the opportunities have not been fair.
Looking at Allen’s business today, an important trait is corporate frugality. “Efficiency will always remain in our DNA,” he said, and Allen traced that focus back to the company’s startup roots.
Allen has grown the business with perseverance, energetic salesmanship and the ability to charm. (Don’t be afraid to press your “ask” firmly in negotiations, he advised, because otherwise “you’ll die poor.”)
Moody’s estimates that about half of Allen’s business revenue comes from advertising where he has long courted Madison Avenue for ads placed on his television shows.
Some 45 years after Allen first spoke into an open microphone, he’s still doing comedy and he’s a regular on his company’s syndicated TV series “Funny You Should Ask,” broadcasting joke streams.
Allen is also the sole owner of Entertainment Studios, making the company minority-owned.
Supreme Court case
Entertainment Studios has filed a multi-year racial discrimination lawsuit against cable TV system giants Comcast and Charter Communications Inc. for content distribution. Although the United States Supreme Court sided with Comcast in March on a procedural issue, Comcast resolved the dispute in June by entering into a cable television network distribution agreement with Entertainment Studios.
S&P Global Inc. praised the deal for providing distribution to entertainment studio networks and extended the company’s flagship Weather Channel distribution deal with a “modest increase in affiliate fees”.
That’s a feat in a difficult environment for price increases as traditional basic cable subscription declines.
Meanwhile, litigation involving Charter – the country’s second-largest traditional cable system operator – remains unresolved.
A knock on Entertainment Studios revolves around governance risks as ownership of the company is concentrated in one person.
Allen brushes off those worries, saying the management team is deep and can deliver on the company’s lofty ambitions for growth. Its leadership ranks are stable, with some employees having accumulated a decade or more of service.
Besides his passion for entertainment studios, Allen is a major donor to the Democratic Party but pragmatically separates politics and business.
Sinclair Broadcast Group – with which he has a 27-year business relationship and with which his family office recently partnered for an investment in regional sports television – leans conservative.
Additionally, the movie arm of its Entertainment Studios distributed “Chappaquiddick,” which cast an unfavorable light on Democratic icon Ted Kennedy.
“Someone’s political preference is something I would never blame them for,” Allen says. “I do business with everyone. This is why America is a great country.
A timeline of success
How Byron Allen built his entertainment empire:
1970s: As a teenager, Allen hangs out in the studios and offices of NBC Television in Burbank, where his mother, Carolyn Folks, works as a network publicist.
1979: After working in clubs and as a joke writer, Allen rose to national fame as the youngest guest comedian on NBC’s “The Tonight Show Starring Johnny Carson.”
1979-1984: Co-stars in NBC’s hit reality series ‘Real People’.
1993: Founds what would become Entertainment Studios, the company that would become his flagship operating company, at his dining room table.
2009: Simultaneously launches six cable networks, including Cars.TV, Comedy.TV and Recipe.TV.
2012: Deploys the seventh JusticeCentral.TV cable network.
2015 : Acquires national theatrical distributor Freestyle, now known as Entertainment Studios Motion Pictures, and related company Freestyle Digital Media.
2016: Buy TheGrio, a digital video-centric news community platform geared toward black audiences.
2017: Launches an annual Oscar fundraising party for Children’s Hospital Los Angeles featuring Hollywood talent.
2018: Entertainment Studios Announces $500 Million Credit Facility; buys the linear television assets of The Weather Channel for $310 million.
2019: Acquires four network-affiliated television stations for $165 million; invests with Sinclair Broadcast Group to acquire 21 regional sports television networks.
2020: Raises $1 billion in debt financing, buys 11 network-affiliated TV stations for $305 million. Resolves a racial bias dispute with cable TV giant Comcast, which signs a full content distribution deal.