Venture capital and growth financing are helping film and TV businesses to grow IP, produce more content, and reach new markets
Last month, Preqin First Close explored the latest M&A in media and entertainment, as movie studios and streaming services acquire new IP and build platform value.
Here, we focus the lens on venture capital (VC) and growth financing, as well as other deals and developments across the film and TV industry.
Entertainment is changing. According to an EY analysis published in August, ‘the content ecosystem is evolving as media leaders recalibrate their streaming focus from rapid expansion to sustainable engagement and profitability’.
For film and TV platforms, this means expanding content libraries by acquiring more IP and increasing original production, leveraging technology, and reaching new markets.
VC and growth capital investors are taking a starring role.
MUBI, a streamer and producer of indie and arthouse cinema, secured $100mn from Sequoia Capital in a venture round in May. The $1bn valuation makes it a unicorn. The London-based company, which has approximately 20 million users, plans to invest in a pipeline of original and acquired films, as well as expand its global distribution network.
‘We believe there’s a substantial untapped market for high-quality, independent cinema worldwide,’ said Andrew Reed, Partner at Sequoia.
Filmhub, an all-rights film and TV distributor, closed a growth financing round in May, led by NextEquity Partners. The Sacramento-based company raised $6.98mn, according to Preqin Pro. It aims to accelerate content acquisitions and product expansion, as well as invest more in technology.
According to Preqin data on the film and TV industry (excluding tech start-ups in film production), there were a total of 102 VC deals over the last six years, with the volume dropping slightly year-on-year since the pandemic.
The data shows the geographic spread of venture deals beyond Hollywood. Three-quarters involved Asian film and TV companies, the vast majority in China, while North America and Europe saw about 10% each.
VC firms are also targeting AI content start-ups. There was a string of rounds earlier this year, driven by the potential for AI to uncork more creativity and deliver major efficiencies across film production and distribution.
Deals listed on Preqin Pro include:
New York-based Runway AI’s $308mn series D, led by General Atlantic. It aims to expand its film and animation production arm after signing a partnership deal with Lionsgate Studios last year. The round doubled Runway’s valuation to over $3bn in less than two years.
Wonder Studios’ $3mn pre-seed led by LocalGlobe. The London-based creative agency launched in April and is designing new products to enhance content creation.
LA-based Cheehoo’s $10mn round to advance its AI-driven animation tools and expand integrations, co-led by Greycroft Partners and Point72 Ventures.
Investors are supporting the film and TV scene across Europe, too. A growth capital fund designed to strengthen production companies in the EU was launched by Axio Capital in April.
The Together Fund plans to take minority stakes in up to 15 independent producers, helping them attract new partners and expand their reach.
The fund has an initial capitalization of €58mn and a target size of €100mn. It brings together private and public investors, and is backed by the European Investment Fund, the EU's specialist vehicle for private equity, guarantees, and microfinance, which has committed €25mn.
Axio Capital says film and TV production across Europe is highly fragmented at a time when there’s growing demand for new content. This creates ‘an urgent need to strengthen the capital base of independent European production companies, preparing them for future market consolidations.’
Studio infrastructure and real estate are also providing opportunities.
Last month, investment platform Zello acquired Cinelease, a lighting and grip rental company and studio facility manager. The company aims to expand its production infrastructure and unlock scale across North America.
In June, Shadowbox Studios secured £250mn in debt refinancing from Apollo Global Management for its UK facility, Shinfield Studios. The one million square foot facility, which opened last year, includes 18 soundstages, workshops, and over 11 acres of backlot. Atlanta-based Shadowbox is owned and controlled by affiliates of Commonwealth Asset Management and Silver Lake.
Meanwhile, Bain Capital and BARDAS Investment Group are developing the new Echelon Studios brand. They formed a joint venture in 2019 to acquire, renovate, develop, and operate space for content production.
A new 600,000 square foot studio campus in Hollywood is expected to be completed next year, while a six-floor facility is being built in Brooklyn, New York, after Bain and developer Bungalow Projects acquired the property for $34mn last year.
The film and TV industry continues to experience mixed fortunes. Earlier this year, the World Intellectual Property Organization reported that global movie production hit a historic high in 2023 – the latest year for which full global data is available. But the industry has since faced turbulence from entertainment market corrections and a scaling back in commissioning.
Investors will be hoping for some box office hits before the credits roll.
Rupert Gilbey is Senior Content Editor at Preqin, a part of BlackRock.
Second Look is edited by Libby Fennessy, Production Editor of Preqin First Close.
Read the original story in Preqin First Close, your essential newsletter for the global alternatives industry.
It’s quick, free, and easy to subscribe here.
The opinions and facts included in the above do not constitute investment advice. Professional advice should be sought before making any investment or other decisions. Preqin accepts no liability for any decisions taken in relation to the above.