Entertainment One Ltd (LON:ETO) capital markets day (CMD) presentation highlighted its strong content and depth of management, with its independence allowing the luxury of platform agnosticism. With the major tech platforms building audience engagement to drive their broader business models, high-quality content remains a key differentiator that plays to eOne’s strengths. The strategy for Family & Brands is to focus on a tight portfolio, maximising merchandising and licensing opportunities. Recent strong share price performance has narrowed the discount to peers, but further positive newsflow would allow additional upside. Our forecasts are unchanged.
Pure-play content
Management estimates FY18 global TV content spend at c US$95bn, excluding Google (NASDAQ:GOOGL), Apple (NASDAQ:AAPL) and Facebook (NASDAQ:FB) (these last two have indicated spend of over €1bn - likely to be very conservative). eOne is shifting emphasis from lower-margin theatrical distribution to focus on pure-play content where it controls the global rights and can select the most advantageous buyers by territory. Mark Gordon (remaining 49% bought in January – see update) is ramping up content creation, with 60 shows either set up or in negotiation with networks, versus 15 a year earlier. The benefit of controlling global rights is clearly shown with a third series of Designated Survivor being commissioned by Netflix (NASDAQ:NFLX) from 2019, after ABC chose not to continue. The developing music offering gives some synergistic benefits, with opportunities for managed artists to provide music for other group properties.
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