Endeavor, the talent agency and sports and entertainment group that owns IMG, has reported first-half revenues of $2.05bn (€1.85bn) and adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) of $249.7m, as the effect of a trio of hefty football media-rights contracts is felt.
The financial results, which come as Endeavor edges closer to listing its shares on the New York Stock Exchange, have particularly highlighted the impact of IMG’s international media-rights distribution deals for Serie A, LaLiga and the FA Cup, with all three contracts beginning at the start of the 2018-19 season.
Endeavor’s operations are split into three main divisions: Entertainment and Sports (including rights trading); Representation (of talent); and Endeavor X (the direct-to-consumer and business-to-business streaming services).
The Entertainment and Sports segment comfortably generates the highest slice of revenues, and posted $1.33bn in first-half revenues, a 46.4-per-cent year-on-year rise, according to the Endeavor Group Holdings filing seen by SportBusiness.
Approximately $352m of the total $422.4m increase is attributable to the sale of media rights – chiefly through the trio of football rights contracts – but also the media rights and residential pay-per-view contracts between the Endeavor-owned UFC and US sports broadcaster ESPN. Growth at IMG Arena, IMG’s betting business, plus owned events and sports production were also credited for the overall revenue rise.
First-half adjusted Ebitda at the Entertainment and Sports segment was $187.6m, up 9.8 per cent on the figure posted 12 months earlier.
On that figure, Endeavor noted that the increase was “primarily due to increased UFC media sales, offset by costs associated with the acquired soccer media rights in excess of revenue, for which the seasons commenced in the second half of 2018”.
Endeavor added: “The soccer media-rights contracts will continue to adversely impact adjusted Ebitda for the term of the contracts, however, the year-over-year impact will moderate as the second season begins in the third quarter of 2019. Two of these contracts expire at the end of 2021 [Serie A and LaLiga] and the third expires at the end of 2024 [the FA Cup].”
IMG is paying just over €380m per season for the Serie A international rights contract, albeit that sum also includes club archive rights, betting rights, a marketing spend and fee for access to the broadcast signal. That agreement represents a near doubling of the fee paid by MP & Silva during the previous cycle. The average of $121.7m per season IMG is paying for the FA Cup’s international broadcast rights (excluding Western Europe and the Middle East and North Africa) also represents a significant uplift.
IMG’s LaLiga rights agreement covers the sale of media rights in the Nordic countries between 2018-19 and 2020-21.
The first-half figures do reflect an improvement for the Entertainment and Sports segment compared to the first quarter, when adjusted Ebitda decreased by 33.6 per cent. At a group level, a rosier picture than that within the IPO filing offered to investors in May has also been painted.
On the representation side of Endeavor’s business, revenues for the first six months of 2019 totalled $688.3m, a year-on-year uplift of 18.2 per cent. This was primarily driven by the talent and brand representation businesses, Endeavor Content and licensing activities.
The Representation segment reported first-half adjusted Ebitda of $175m, a 24.7-per-cent increase.
Meanwhile, first-half revenues at Endeavor X were $57.4m, a marked jump of $44.7m on the first six months of 2018 and largely thanks to the $250m acquisition of NeuLion, the live and on-demand streaming technology firm, in May last year. Operations at NeuLion were merged with Endeavor’s existing streaming activities as the ‘Endeavor Streaming’ name was adopted.
Endeavor Streaming powers the UFC’s Fight Pass service and handles digital pay-per-views, and also counts World Wrestling Entertainment among its clients.
The segment’s adjusted first-half Ebitda losses were $27.4m, compared to the $15.2m losses posted a year ago. Endeavor said that this was primarily driven by start-up costs associated with its digital and direct-to-consumer initiatives and heightened direct operating costs. The segment is expected to incur a loss for the full year.
Endeavor, which is carrying long-term debt of $4.6bn, reported that overall direct operating costs totalled $1.09bn for the first six months of the year, up 67.2 per cent.
The filing stated: “Approximately $336m of the increase is attributable to media rights, primarily due to the acquisition of rights to major soccer events. The remaining increase related to higher costs in Endeavor X, including from the acquisition of NeuLion, and higher costs in sports production, owned events and IMG Arena related to higher revenue.”
Endeavor acquired IMG for $2.3bn in 2013 and then went on buy UFC in 2016 for an initial $3.8bn.
Having filed the necessary IPO paperwork in May, it was initially expected that Endeavor would list on the New York Stock Exchange by August. However, it was recently reported that the IPO had been postponed until at least September.