Top 3 SPAC Targets – Streaming Services

Top 3 SPAC Targets – Streaming Services

SPACInsider contributors Anthony Sozzi and Sam Beattie this week compiled their three favorite potential SPAC targets among video and audio streaming services. We look at why they are compelling and why each could be a fit for a blank-check merger.


Much has been made of the way streaming services had their moment during the pandemic with the world’s population maximally locked in and bored. But, this viral boost was more of an acceleration of existing trends rather than a temporary bump.

The online video and audio streaming market is expected to grow at a CAGR of 18% through 2024, adding about $150 billion in total market value over that time. Video streaming specifically is expected to grow even faster at a CAGR of 21% through 2028. This pace is clipping at the heels of SPACs’ favorite sector by deal volume – fintech – which is itself expected to notch a CAGR of 23.5% through 2025.

Triller

Streaming platforms are also evolving at a rapid pace, as exemplified by Netherlands-based Triller. It initially launched in 2015 as something like a TikTok competitor focused on short form videos but has had a wild ride over the past year.

It was reportedly talking to multiple SPACs last summer as the Trump administration toyed with shutting down TikTok, but the story has changed in many ways since then. For one, the political change in Washington has removed the notion that Triller could simply take over a void created by a banned, sidelined or bought-out TikTok.

But Triller did not sit still and has instead crafted a new investment thesis for itself in the intervening months. First, it raised a $100 million funding round, more than tripling the total outside funding the company has taken in and it then acquired three companies in 2021 to add capabilities in multiple directions.

In March, it bought music-streamer Verzuz in a deal that gave Triller equity to a broad set of performers. It then bought Fite TV in April to beef up its holdings in the MMA video space having exceeded revenue expectations from a bout between Mike Tyson and Roy Jones that it streamed in collaboration with Fite in November. Although Fite is to remain a separate site, the cross-pollination from a channel delivering content from one of the fastest growing sports is sure to add heft to its operations.

Also that month, Triller acquired Amplify.ai, which uses tools to more accurately inform advertisers how consumers engage with ads and make purchases and was used by the Biden campaign to allocate funding in battleground states. Doubling down on the data side, it elevated Amplify’s CEO to head its own parent company, TrillerNet.

These buys reportedly cost the company about $250 million, which is roughly what the company expects to generate in 2021 revenue. Even if the story has changed, a SPAC deal could see Triller re-capitalized to keep fighting in the competitive streaming space.

Triller’s last capital raise reportedly set the valuation for the group at $1.25 billion, but deal talks last year discussed price tags ranging from $3 billion to $6 billion for the company. Last year’s action also saw the company hire M. Klein & Company as an advisor, making it easy to connect the dots to Triller potentially combining with one of Michael Klein’s three active Churchill SPACs (CCV, CCVI, CVII).

Klein at the time was reportedly not angling for a deal, but his vehicles have inked transactions with companies backed by his clients in the past.

Deezer

While Triller takes on TikTok, Deezer has set its sights on Spotify’s (NYSE:SPOT) hold on subscription music streaming. The Paris-based company has racked up 16 million active users and 73 million songs available.

This exceeds Spotify’s track catalog, which sits at about 70 million songs, but represents only about one-tenth of its user base of 158 million subscribers. Nonetheless, there is plenty of value there as Spotify expects over $11 billion in revenue in 2021.

Deezer solidified a $1.4 billion valuation in a July 2020 capital raise that brought in a fair amount of strategic perks with it. The round was led by Mexico’s TV Azteca, which gave the company a weekly show called “Deezer Live” and folded the channel’s own social music app, Mugo, into Deezer Premium.

It also marked an entrenchment of Deezer’s position in the Latin American music scene where the market share and revenues for streaming services are growing faster than the global average. Deezer has now built up a network of three offices in Latin America and 12 in Europe, studiously avoiding the US where Spotify, Apple Music and Pandora hold strong market positions.

But, a SPAC deal would certainly announce its entry to the North American party with a bang. Deezer’s parent company, Access Industries, is also a majority owner of Warner Music Group (NASDAQ:WMG) and likely sees an eventual entry to the continent as an inevitable strategic step.

As an industry, music has long been siloed by a small number of overall owner groups. But these players are now seeing greater value in spinning pieces of their empires off and Deezer appears to be a prime target for such a move. Vivendi (PA:VIV) is currently working to spin off Universal Music in a move that could see the spun-off child valued several times higher than the parent.

The potential for generating NFT’s has only strengthened this thinking among holders of legacy intellectual property, as exemplified by Mudrick II (NASDAQ:MUDS)’s proposed combination with collectible card-maker Topps.

Vevo

But, why stop the spinning there? Why not let the good times roll?

Whatever Universal Music’s final value is in its IPO, one of its more complicated assets is its controlling stake in Vevo, last reported at 49.4%. Sony (TYO:6758), Alphabet (NASDAQ:GOOGL), EMI, Warner, Merlin, and Independent all also own a piece as the joint venture has been seen as a prime collective channel to release content for these stakeholders.

At times, it was also seen as a potential competitor to YouTube, or a re-imagining of the classic MTV music video business. Both of these battle plans were later abandoned, but the property has already worked out new avenues to consumer eyeballs.

In January, it struck a deal with Comcast (NASDAQ:CMCSA) to stream its content 24/7 to cable users. Although there has a been a general trend of viewership moving towards smaller and smaller screens, Vevo is among the new small-screen entities that has a growing share in the TV space. In 2020, about 40% of its audience was watching its content on TV screens.

As it stands, Vevo has a value estimated at about $1 billion with $350 million in annual revenue. And, having been around since 2009, it has already adjusted to a number of  changes in content-consumption that has occurred since, with the power to roll with it coming from its stakeholders’ licensed content.

Should it seek to use SPAC proceeds to energize a new platform, it would not be the first to do so. Documentary-streamer Curiositystream (NASDAQ:CURI) listed via Software Acquisition Group last year and movie-rental service Redbox announced a deal with Seaport Global (NASDAQ:SGAM) last week.

Vevo has the ingredients in place to take the mantle of the go-to music video streaming service, and the vision for its next step could come from within its own family. Neil Jacobson, who heads The Music Acquisition Corporation (NYSE:TMAC) as CEO and chairman, is a longtime talent manager as an EVP at Universal Music. If he has had any ideas for new directions for Vevo through the years, he likely already has Vevo’s ear, and its phone number.