As oil prices plunge, the kingdom's Public Investment Fund has made an offer for Warner Music Group, after nabbing a $500 million Live Nation stake to diversify.
Saudi Arabia, led by Mohammed Bin Salman, boasts a $300 billion fund that remains interested in the entertainment and sports sector.
On April 27, Saudi Arabia disclosed in an SEC filing that it has taken a 5.7 percent stake in Live Nation, led by CEO Michael Rapino, via its sovereign wealth fund. The $500 million move marked the Public Investment Fund's first known buy-in of an American entertainment company since the October 2018 murder of Washington Post columnist Jamal Khashoggi — a crime attributed to Saudi government agents that abruptly ended Hollywood's love affair with Crown Prince Mohammed bin Salman. Now, the question looms: Was the Live Nation investment a one-off or a sign of more to come?
Sources familiar with the PIF's strategy tell The Hollywood Reporter to expect more deals. Lots more. The $300 billion fund remains interested in the entertainment and sports sector and is close to completing a $380 million deal to acquire England's Newcastle United soccer team. Carla DiBello, a Dubai-based Saudi rainmaker with Hollywood film and TV roots, spearheaded that deal. With oil at rock-bottom prices thanks to the novel coronavirus pandemic, the Saudis are motivated to diversify, and with showbiz stocks declining, the timing could be right for more showbiz investments.
As such, the PIF has made an offer to buy Warner Music Group, according to a source close to WMG owner Len Blavatnik. The privately held label — one of only three majors, with artists like Madonna and Camila Cabello — is valued at around $12.5 billion. "There's one other bid in the mix, and it will come down to a number," says the source. The PIF declined comment. Back in February, the fund made an offer to buy a small stake in WMG for $750 million right before the music label submitted paperwork to begin an initial public offering of its common stock. But on March 2, WMG put its IPO plans on hold because of market volatility, making a PIF offer all the more attractive.
Although everyone from Disney to AMC Theatres has begun to offer debt in the COVID-19 fallout, some analysts say it would be better to take Saudi equity. "It would be a welcome investment from a debt perspective to see some of these companies that are more dramatically affected bring in some equity rather than just bringing [on] lots of debt, particularly some of the larger-cap media names like Disney and ViacomCBS," says Moody's analyst Neil Begley. "I just can't say whether or not the folks at Disney would be willing to entertain issuing equity at this juncture. But for some of these companies that have an uncertain horizon at this time, it certainly would be prudent, particularly for their credit ratings."
Meanwhile, Hollywood’s anti-Saudi sentiment appears to be waning. In October, movie stars publicly returned to Riyadh for the first time since Khashoggi’s murder as Jason Momoa, Jackie Chan and Shah Rukh Khan were among the speakers at Saudi Arabia’s Joy Entertainment Forum. Similarly, Spike Lee and Oliver Stone signed on for the inaugural Red Sea Film Festival, which was recently postponed from its March 12 start date due to coronavirus concerns.
Also notable, the Sundance doc The Dissident, which chronicles Khashoggi’s murder, still hasn’t found a home despite having drawn such supporters as Hillary Clinton and Alec Baldwin at its Park City premiere in January. Several of the bigger buyers have passed even though it was a blockbuster year for docs at the festival and the Dan Fogel-helmed film garnered strong reviews. Following a Feb. 26 screening of the film at UTA, Fogel told moderators Baldwin and Sean Penn, “The major global distributors are scared of this film.” (Fogel declined to comment for this story.)
But as the pandemic wreaks havoc on the Hollywood economy, many companies would rather take a PR hit than lose their financial footing or go under altogether. Perhaps tellingly, there was scant blowback on Twitter over the Live Nation investment, which was made on the open market and didn’t require the touring giant’s consent. Judd Apatow was the only notable industry figure to express disdain on Twitter, but then he removed the tweet.
“It is interesting that there has been no obvious reaction. But then again, a lot of companies are totally desperate right now,” says Jean-Francois Seznec, a Gulf expert at Washington-based think tank the Middle East Institute. “I guess nobody wants to complain because they might have to go to that trough themselves one of these days.”
That silence signals a stark turnaround from fall 2018 when the Saudi outrage factor was high. Endeavor Content's Ari Emanuel returned to the PIF a $400 million investment. Before Saudi money became radioactive, Penske Media, which owns Variety and Rolling Stone, took a $200 million investment from the Saudis. One Penske staffer who was initially upset when the money wasn't returned post-Khashoggi now notes the absence of layoffs at the media company. The source adds, "Now that everything is going to hell, I feel less awful about it."