Canadian studios look to M&A to stay competitive

Deals like the Blue Ant Media and marblemedia merger are helping domestic companies scale up to compete globally, but it's not a one-size-fits-all approach.

If you ask Blue Ant Media co-founder and CEO Michael MacMillan what the value of his company’s recent acquisition of Toronto’s marblemedia is, he’ll put it simply: “Priceless.”

While the company isn’t disclosing the financial details of the deal, that answer does speak to the sky’s the limit thinking that compelled MacMillan (pictured middle) and marblemedia co-founders Matthew Hornburg (pictured left) and Mark Bishop (pictured right) to begin talks in 2022 to merge the companies.

“It really is about coming at this from a place of strength,” Bishop tells Playback, adding that the company witnessed “genuine enthusiasm and excitement” from key streaming partners during MIPCOM in October 2023. “Our global partners really see this as an opportunity for taking bigger swings; for creating bigger, noisy, really meaningful opportunities to tell great stories in the marketplace and to work in different ways.”

The deal, announced on Aug. 10, 2023, sees marblemedia and Blue Ant Media’s production and distribution business merge into what will be a single studio, which operates under Blue Ant Media as the parent company, with Hornburg and Bishop as co-presidents. Hornburg says the brand name is expected to be announced in early 2024.

The new team structure includes separate scripted and unscripted development teams (Bishop leads scripted, while Hornburg heads up unscripted), as well as a distinct Kids, Family and Young Adult division based in L.A., and plans to expand its animation studio, led by Josh Bowen. The company also maintains its global sales hubs, combining marblemedia’s Distribution360 with Blue Ant International.

MacMillan says there have been “a few” job losses as a result of the merged business, with some more cuts to come as they continue to examine the overlap. “But at the same time, we’re filling gaps, we’re hiring, and we’ve got pretty clear and immediate ambitions for adding roles,” he says.

The deal represents the kind of scaling up that Blink49 Studios co-founder and CEO John Morayniss (pictured right) argues will be necessary for Canada to compete globally. “There’s got to be a pivot to more of a bigger studio [and] global content build, leveraging the channel business in Canada, but not relying on it to the extent that they have to generate revenue and growth,” he says.

Toronto and L.A.-based Blink49 made its first corporate acquisition in late 2023, buying a majority stake in Vancouver-headquartered prodco Front Street Pictures, which is best known for its work as a service producer in the MoW business.

Morayniss says the acquisition was the perfect fit for both companies. Blink49 wanted its first acquisition to be a Canadian company, and Front Street served as a way to expand into MoW and service production — offsetting the more risk-taking IP business Blink49 has operated in so far — and extend its reach geographically, with locations in B.C. and Alberta.

On the flip side, Front Street — led by president Charles Cooper — is now able to tap into Blink49’s resources to expand into original production.

With the support of its anchor investor Fifth Season, Morayniss says Blink49 is looking beyond Canada’s borders for its next opportunity to scale, although he says they’re ideally looking for a company with ties to the Canadian market.

Similar to the Front Street deal, he says Blink49 is looking at avenues they’re not currently invested in, including short-form content and social media (which he says opens more opportunities to connect with emerging voices), and companies that are “more on the monetization side of the business.”

Scaling up isn’t a one-size-fits-all approach, however. Entertainment law expert Stephen Selznick (pictured left), a partner at Toronto’s Cassels Brock & Blackwell LLP, says most companies operating in Canada’s screen sector should be focused on remaining adaptable in the face of looming regulatory changes at the Canadian Radio-television and Telecommunications Commission (CRTC) following the passage of Bill C-11.

“My sense is, over the next year to 18 months, that being nimble is the important thing,” says Selznick.

One aspect he’s carefully looking at is the federal government’s policy direction to the CRTC to modernize the definition of Canadian content. Selznick says he doesn’t expect the definition to “change dramatically,” but that the CRTC may “be more realistic about what the ownership requirements are for Canadian content, so that Canadians can produce internationally with foreign money, because we don’t have the money in Canada to necessarily do all this work.”

Selznick also predicts that the Department of Canadian Heritage will explore a “transition from project-based financing” to provide prodcos with “their own internal capital resources to do development.”

An increase in business sector development is already in the works at the funder level. The Canada Media Fund announced on Sept. 18, 2023, that Canadian Heritage had unlocked new authorities for the funder to modernize its model, including “expanded sector development.” The changes also include the end of its Convergent and Experimental streams, and the potential for distributors to trigger production funding.

“I’d rather be nimble than a big infrastructure,” suggests Selznick, pointing to companies such as Entertainment One (eOne), which scaled up with a number of acquisitions, before eventually selling to Hasbro in 2019 for US$3.8 billion. (Since then, Hasbro has sold eOne’s film and TV assets, and its share of the Canadian business, to Lionsgate for US$375 million, and its production loans.)

“You would think that building all these sources of revenue into one location gives you economy of scale; it gives you economies of costs more than anything,” he says.

“I do agree that getting bigger can be better,” adds Selznick, “but I think that should be looked at very carefully, and [companies need to] identify your market.

For Blue Ant Media, the Canadian market is a very small piece of the pie in terms of their overall focus. “Our market is the world,” says MacMillan. “We’re very much aiming at the American, European and international market, and we think that bringing production and distribution together and growing our size is important because our competitors internationally are also growing and are very able and very well-connected. We need to be equally able and equally well-connected.”

As an example, one area of focus for the newly formed divisions is to have the distribution and sales side work more closely with the development teams to “think about the needs of the international market from day one,” says Bishop.

“It’s really looking at that commercial strategy as early as possible and picking that up across all genres,” he adds, noting that the reach of the merged studio expands the opportunities to sell projects, whether it’s to a global streamer, through several buyers in multi-territory deals, or just down the hall at Blue Ant’s existing channels.

Hornburg adds that the merger allows the company to not only build on marblemedia and Blue Ant Studios’ previous success, but “elevate it” through creating a larger “brain trust” within the company, pointing to 2024 as the time when they’ll unveil more of the creative deals and partnerships to come.

Bishop argues that a homegrown, globally competitive studio is ultimately good for Canada. “We’re going to continue to invest in Canadian content with producers, coast to coast, and we’re selling that content all around the world,” he says. “I think it’s a really good news story for the Canadian industry in a time when there are challenges out there, this regulatory uncertainty and all of those things that we have no control over. What we can do is be great partners and great investors.”

This story originally appeared in Playback‘s Winter 2023 issue