Why Penske Bought All The Media Companies

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This episode memo was brought to you by 4se.

On May 21 – 22, Leaders and Sports Business Journal will come together for 4se (pronounced ‘force’) New York–their second annual event experience that brings the worlds of sports and entertainment together to help grow your integrated entertainment business strategies.

4se will bring together 600 top execs from music, sports, fashion, lifestyle, and culture. You can now see the full agenda, which includes speakers from Universal Music Group, Major League Baseball, NHL, WWE, Reddit, Under Armour, NASCAR, Mitchell & Ness, and more. Other partners for 4se include Amazon Prime, Constellation Brands, and Meta.

I’ve talked to the team organizing this year’s event at Chelsea Industrial. There’s a big focus for 4se on music x sports, brand collaborations, audience growth, and more opportunities that can grow your business.

Sounds interesting? You can learn more about the event and other speakers here.

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In this week’s episode and memo, we break down why PMC bought these companies, their impact on music and entertainment coverage, pros and cons, business models, and which companies we think are next to get scooped up.

I’m joined by former Billboard editorial director, Bill Werde, who has covered this topic in his newsletter, Full Rate No Cap.

You can listen to us here or read below for a few highlights.

Buy low and thrive

The Penske Media Corporation’s private equity portfolio is full of media companies that were bought for a low price to build stronger businesses. It paid a few million dollars for Deadline in 2009, and $25 million for Variety in 2012. PMC bought Rolling Stone for around $100 million between 2017 and 2019, and in 2020 the firm spent $225 million for an 80% stake in MRC’s companies including Billboard, The Hollywood Reporter, and Vibe combined. And that’s just a few, there are plenty more.

While media companies like BuzzFeed and Huffington Post were brand new overvalued unicorns, Penske focused on the undervalued legacy institutions. It’s Moneyball for media companies. It’s Sam Presti but for trade publications. Which assets will be the first-round pick that turns into MVP-runner up, Shai Gilgeous-Alexander?

PMC operates its brands like a major record label oversees its sublabels. Billboard, Variety, and Music Business Worldwide are under the same roof but compete for the same exclusives, unique scoops, and similar stories. That’s by design.

Similarly, Sony Music’s Columbia, RCA, and Epic Records all compete with each other for market share and to sign top talent. Competition raises the bar for the product across the portfolio. The cost-saving synergies are on the back end, not the front end.

These Penske businesses have also shifted their revenue mix. There has been an increase in live events around their power players lists and award shows. Events are an opportunity to sell ad space that’s harder for Google and Meta to eat into. Instagram ads can take digital ad dollars away, but Instagram can’t replicate an in-person event. Plus, the Penske brands have more subscriptions now like Billboard Pro, and membership products like Variety’s VIP+.

But does the consolidation lead to conflicts of interest? As Bill mentioned in the episode, it may lead to a lack of coverage in certain areas. For instance, the coverage of Saudi Arabia’s controversial investments and activity in music and entertainment may be one of those topics. In 2018, Penske received a $200 million investment from the Saudi Research and Media Group.

You can listen to the rest of the episode here or read below for more highlights.

Control of the FYC

The throughline for Penske’s trade publications is the ad inventory for awards show campaigning. For Your Consideration ads are multi-billion dollar businesses for the Oscars, Grammys, and Emmys. Since Penske sells ads across its portfolio, it becomes the go-to destination for companies that want to reach the voting members of their respective academies.

Despite the shift of ad dollars to socials, the B2B trade publications will still be home for statement advertising. It’s not just about reaching individual Grammy voters—it’s about the flex. It’s communicating to the industry that you’re pushing this campaign. It’s the digital version of the countless billboards in Los Angeles for Netflix’s Oscar campaign for Maestro. Was it excessive? Yes. Did the movie ever have a chance to win? No. But as Bill mentioned, these are lottery tickets that most of these companies are willing to buy.

The Penske brands have a strong hold on FYC, but it’s far from a monopoly. Independent companies like The Ankler and Puck still capture a portion of that Hollywood campaign season business. I see similar opportunities for independent companies in music to reach The Recording Academy voting members as well.

Next ones up

Both Bill and I made predictions for the next music companies to get acquired by Penske. Bill predicted Music Ally but jokingly mentioned Trapital as well.

I laughed. For what it’s worth though, a friend of mine, who runs a business with a similar business model to Trapital, was extended an offer from Penske to buy their company at a low, low revenue multiple. It isn’t surprising given Penske’s buy-low approach. I get it, media is not the highest-margin business. But fortunately, I have no need to sell low.

This quote from Bill sums it up:

“Ultimately what ends up happening is the offers that a company like Penske is going to make. You look at that and you look at what you're already making on your own and it makes no sense.“

My prediction for acquisition targets is the companies I mentioned earlier, like Puck and The Ankler. They both took outside investments, and those investors will likely want an exit. Media companies like that are most likely to exit through a larger publisher or a private equity company—like Penske.

Listen to the rest of the episode for more on:

– how Billboard’s business model has evolved over the past 15 years
– challenges facing Rolling Stone
– what if Penske sells? Who would acquire PMC?

Chartmetric stat of the week

Drake has dominated headlines, but his monthly Spotify listeners were at 82 million (as of May 7), which is still below the 85.1 million he had on February 7, during his It’s All A Blur Tour. Meanwhile, Drake’s Wikipedia page had a 20x increase in daily views after the release of “Family Matters” and Kendrick Lamar’s “Not Like Us.” Page views jumped from an average of 14.5k per day in March and April 2024 to over 320,000 in the two days after their release. Despite the decline in streams, Drake’s still getting attention.

You can listen to us here.