Endeavor Group Holdings, one of the world's largest talent and content agencies, filed for its initial public offering in late May 2019. In the following episode from The Motley Fool's Industry Focus podcast, analyst Nick Sciple and contributor Asit Sharma provide an overview of a company that owns a wide variety of signature businesses, from the venerable William Morris talent agency to the colorful mixed martial arts promotion company UFC. Simply click below for a birds-eye view of this upcoming IPO!
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This video was recorded on July 09, 2019.
Nick Sciple: For folks who aren't familiar with Endeavor, this is primarily a talent agency. Traces its business back to 1898 with the founding of William Morris Agency. Today, it's the longest-running, largest talent agency in the world. However, in recent years, the company has reshaped itself through a series of acquisitions that has moved it from traditional representation agency business into all manner of businesses, including content -- they now own UFC -- and other assets. Asit, can you give us an overview of what Endeavor looks like today and how it grew to its current size, through acquisition and otherwise?
Asit Sharma: Sure. As you said, the company traces its roots back to 1898 with the founding of the William Morris Agency. In the 2000s, Endeavor Agency was formed by Ari Emanuel, and this company merged with WMA, William Morris, in 2009. Their next big step was to acquire IMG, that is the huge sports and marketing company. They did this off of some private equity fuel that they came across in 2012, when Silver Lake Partners became a major investor in the company. That changed the trajectory from these traditional talent agencies into a company that would become a serial acquirer. They acquired the Miss Universe and Pro Bull Riders in 2015. Listeners are familiar with the mixed martial arts giant UFC, they acquired that in 2016. And they launched their own content arm in 2017 called Endeavor Content. This previous year, 2018, they broadened into podcasts, VIP experiences, so experiential revenue, and also into sports betting, which is something you and I have discussed before, Nick. They're now into that with IMG Arena. One more company to mention is Learfield IMG College, which is a college licensing company, which has rights to different college brands. That's a very lucrative business. We'll get back to this small company later in the show, because that plays into how Endeavor sometimes acquires and also sells interest in companies that it's made more powerful. But that is basically a brief overview of their history.
Their business model is one that's extremely diverse. It starts with talent, but they also have a lot of intellectual property. They're in the content business. Again, it's a manifold of industries, from the traditional right of representation into, as I mentioned, sports betting, into sports and sports broadcasting. This is a company with a really wide footprint. One of the questions that we will cover in this show, is the footprint too wide? Can you make money when you are a jack of all trades in the content and distribution marketing world?
Sciple: You're exactly right. You look at the market, they call out in their S-1 their total addressable market being the global entertainment sports and media market. They say that's a $1.9 trillion market as of 2017. Obviously, when you take a look at a total addressable market that size, the realistic market is probably a little bit smaller than that, but they're playing all over the place when it comes to content and representation. They say that access is the key to their business model. Traditionally, that had been defined as through talent, but recently, they broadened that access to include brands, intellectual property, owned assets, as you mentioned, UFC. As we've seen content grow over time, Endeavor touches all parts of that business. They're representing, when you look at the talent side of the business, some of the most significant and important talent in the world. In 2018, Endeavor represented more Academy Award winners and Grammy winners than any other talent agency. This one blew my mind, they accounted for over half of HBO's original programming in 2018. Really, a significant presence across the content landscape. To me, it seems similar in some ways to Live Nation, when you look at the way they play in events, where they touch every major player there.