Now on to Wasserman and the sports boom…

Get excited, we finally have a winner in the monthslong auction of the sports and talent agency formerly known as Wasserman, and it’s… maybe the least sexy of all the suitors. Per two sources familiar, Providence Equity Partners, the P.E. firm that already owns 60 percent of Wasserman (now called The Team), is finalizing a deal to buy out founder Casey Wasserman and take full control of the company.

The deal, which I’m told hasn’t been signed and won’t close for a few weeks, values The Team at about $3.4 billion. That’s a touch higher than the $3 billion estimate cited by most media outlets, but with the company on track for $215 million in adjusted EBITDA this year, the multiple would be only slightly higher than the $7 billion CAA transaction in 2023, when private equity firm TPG sold its controlling stake in that agency to billionaire François-Henri Pinault. (Disclosure: TPG is an investor in Puck.)

So despite all the speculation and conspiracy theories, Casey will indeed walk away from management of his company six months after apologizing for exchanging racy emails nearly 25 years ago with Jeffrey Epstein associate Ghislaine Maxwell. Remember, the uproar over Wasserman, also the chair of the LA28 Olympics, led clients Chappell Roan and Abby Wambach to announce their exits. Wasserman then committed to offloading all or his share of the Westwood-based company, which includes a sports and music agency, a lucrative marketing unit, and the Brillstein talent management firm that reps Brad Pitt and Sydney Sweeney.

Interesting that this deal ended up with Providence. As I’ve reported, there were about a dozen serious bidders, including UTA and the P.E. firms Permira and New Mountain Capital. But during the process, run by the Moelis investment bank, Wasserman insisted on a sky-high valuation and additional go-away money in exchange for a noncompete agreement. UTA and others fell out, and during that time, Providence’s point guy, Davis Noell, began wondering why they were bringing in another partner to co-control the company, especially at a time when there are so many opportunities in sports. So Providence reconsidered selling The Team and eventually decided to double down. I’m told Casey has indeed agreed to the noncompete.

Wasserman’s sale, though forced upon him, may have been particularly well-timed. Outside of the cooling documentary market, sports-related entertainment businesses are hot, driven by higher TV and streaming ratings for most leagues and the shift in content spend away from entertainment (as every out-of-work screenwriter and actor knows). The UFC extracted $7.7 billion over seven years from Paramount, the NFL’s Seattle Seahawks just sold for $9.6 billion, and many of the same favorable economics of the major leagues apply to their athletes. Wasserman and the other sports agency owners would never say this publicly, but betting on their companies is essentially buying an index fund tied to the sports leagues. These days, who wouldn’t want that?

I was chatting about this topic recently with Sean Diffley, an analyst at Morgan Stanley who created a new system for stock-picking called the “MS Media Matrix.” It’s a ranking of publicly traded entertainment companies based on their assets and ability to generate attention, and thus profits, in the modern media landscape. Diffley’s team looks at each firm’s audience and engagement, their “interactivity” (stuff you do rather than passively watch), the “urgency” of the content, pricing power, I.P., and A.I. positioning, and then compares these strengths and weaknesses to the companies’ relative share price. They use the Matrix to recommend stocks.

The theory goes that if generative A.I. fully democratizes content—meaning anyone can make anything at any time on the cheap—some traditional media companies will benefit (he calls them “anti-fragile entertainment assets”) while others will retreat. And the ones that benefit will likely own more live competitions and out-of-home entertainment assets than their peers. “One thing we believe strongly is that in an increasingly fragmented and distracted world, nothing captures viewer attention more than sports and live events, which carry urgency, unpredictability, and a sense of communal participation that reflect and shape the culture,” Diffley wrote to clients a few months ago.

The Media Matrix ranking is a bit similar to the “Attention 20” list of the largest attention-grabbing companies published by Owl & Co., or what Ari Emanuel and Mark Shapiro have talked about as the thesis behind TKO, which owns UFC and WWE, and their Mari holding company, which is gobbling up experiential businesses like the Miami Open and the Frieze art fairs. They’re betting that consumers will enjoy both extra time and money to spend on experiences in the A.I. economy. Diffley noted that the average American’s leisure time has been stuck at between four and five hours per day for the past 20 years, but A.I. automation could add 30 to 45 extra minutes a day to that total.

How will it be spent? Likely with some kind of entertainment, either digital or I.R.L. “Who has the audience?” Diffley asked me, describing his metrics for the ranking. “Who has the engagement? Who has the path to more interactivity with their characters? Do you own your I.P. or are you renting your I.P.? And [what is your] A.I. positioning?” (As Bill Cohan likes to say, this is not investment advice.)

To that end, Formula 1 tops the Morgan Stanley ranking. It’s clearly not the biggest player, or the most influential, but it earned the highest average score based on “strong” ratings in nearly all categories, thanks to growing demand for its I.P. and product. “When we did this analysis, Formula 1 kinda checked every box,” Diffley added, noting that the company trades at a heavy discount to the aggregate value of each of its teams. Among the top five are the concert promoter Live Nation, of course, and TKO. Disney and Netflix are there, too—Disney because of its I.P., theme park cash-extraction machine, and the ESPN sports portfolio; and Netflix because of its dominant (though vulnerable) lead in engagement, and a stock price way down from its recent highs.

According to Diffley, Disney is strong not just because of parks and cruises but also the plan laid out by its new C.E.O., Josh D’Amaro, to turn Disney+ into a digital hub for A.I.-empowered interaction with the company’s characters. “We ask, who has the raw ingredients—the characters, the I.P.—but also has the distribution mechanisms to break through?” Diffley told me. The combined Paramount/Warner Discovery is also in the top 15, and Diffley liked C.E.O. David Ellison’s recent comments about his daughter’s love for Skye from Paw Patrol, and how Paramount+ should host a “customized learning solution” based on the show. “That’s actually the most interesting A.I. winner plus interactivity with your I.P. that I’ve heard articulated by a media executive,” Diffley said.

Presumably, Wasserman’s company—or, now former company—would make a strong showing in Diffley’s system if it were public, though The Team, like all the agencies, is still a service business. That direction will now be up to Mike Watts, the company’s current president, who is expected to stay on under Providence. As for Casey, I’m betting his next move, either before or after the Olympics, is sports team ownership.

See you next Monday,
Matt

Maya Tribbitt contributed research for today’s issue.

Got a question, comment, complaint, or guesses on who will replace Nicole Kidman in ‘Days of Thunder 2’? Email me at Matt@puck.news or call/text me at 310-804-3198.

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