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SpringHill’s $725 Million Valuation Reflects Diverse Revenue Streams

johnwallstreet
·4 min read

SpringHill Company, the content studio and branded marketing agency founded by LeBron James and Maverick Carter, recently raised nine figures at a $725 million post-money valuation. RedBird Capital led the round, which also received participation from Nike, Fenway Sports Group and Epic Games (note: Nike and Epic Games maintain existing commercial relationships with SpringHill; James and RedBird are investors in Fenway Sports Group).

To outsiders, a valuation closing in on three-quarters of a billion dollars may sound rich for a two-year-old production house. But a look under the hood shows SpringHill is not your run-of-the-mill content studio. The company has been building real library value as it churns out scripted and unscripted programming for a host of established and digital distributors. It also maintains deep relationships with key strategic partners (see: Disney for scripted television and Universal Studios for feature films) and has a branded-content business with a pipeline and trajectory that substantiates terminal value appreciation.

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JWS’ Take: To understand how SpringHill became so valuable so quickly, one must understand the two macro trends providing a tailwind and have a firm grasp on what the company entails.

SpringHill was created to be a platform that gave underrepresented and underserved populations a voice (141 employees, 50% women, 67% BIPOC). With brands, agencies, studios and networks increasingly redirecting content and production spend towards minorities, the company has found itself well-positioned to capitalize on the trend. A recent McKinsey report indicated Hollywood has been leaving upwards of $10 billion/year on the table by not championing black-led or black-oriented projects. rEvolution partner Larry Mann said: “If a brand wants to reach the underserved or wants to reach minorities, they need to do it in an authentic manner. And who could be more authentic than Maverick Carter and LeBron James?”

SpringHill has also benefited from the supply-demand imbalance that exists for original programming, the result of an ongoing arms race between established linear providers and the upstart FAANG distributors. For context, Netflix, Apple and Amazon will collectively spend north of $10 billion on content this year.

The SpringHill business has three key components. Their scripted and unscripted content studio, which is responsible for more than one-third of revenues, has at least 10 film or television projects in motion with Netflix, HBO, Hulu, Apple, ABC and Amazon. The company has also seen more than 15 of its unscripted TV projects air in 2021 (including five series renewals).

But unlike many studios, SpringHill prefers to license the content it creates, as opposed to sell the rights. So, the company built a valuable library content and IP (which allows it to tap into other derivative opportunities), while growing the top line. Uninterrupted (which includes the sub-brand More Than an Athlete), The Shop (now in its fourth season) and Kneading Dough (a financial brand with an original TV series, podcast and live-event series) are among their holdings. The latest investment round will help SpringHill remain self-sufficient and be in a position to own more of what they create.

The content library will balloon as the company increases in-house production capabilities (which should also boost margins), adds new creators and producers to the roster, and takes aim at some of the M&A targets it has in sight.

SpringHill also has a rapidly growing (think: almost 100% YoY) branded-content business responsible for roughly half of company revenues. Nike, Google, Walmart, J.P. Morgan Chase, American Express, General Motors and Epic Games are among the blue-chip companies that lean on James, Carter and Co. for creative and strategic guidance. Mann explained that media buyers at that level tend to be particularly sticky (which helps to provide transparency on go-forward growth for investors). “These guys have gotten themselves ingrained with the top Fortune 100 companies,” Mann said. “As long as content continues to be king, they are going to continue to grow.”

The remainder of SpringHill revenues come from its commerce and licensing business (think: More Than an Athlete apparel). The company is believed to be in discussions with several consumer product companies about licensing The Shop IP for the development and distribution of a men’s grooming line.

A source with knowledge of the deal terms tells JohnWallStreet that from a revenue-multiple standpoint, the SpringHill valuation is in line with other comps, like the Reese Witherspoon-led Hello Sunshine (sold for $900 million in September). However, Hello Sunshine is a traditional production studio that primarily creates content for a fee. SpringHill has more revenue streams at scale. One could argue that, with the downside protection offered by the content library and a bustling creative agency business, SpringHill is actually undervalued. James’ and Carter’s business partner and adviser Paul Wachter said: “It’s a unique business with explosive potential. It has multiple revenue streams which are growing rapidly, owns very valuable IP, and has a singularly dynamic and diverse leadership team starting with LeBron James and Maverick Carter.”

SpringHill was not available to comment for our story. RedBird declined to comment.

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