The Math for Digital IP Roll Ups + Was $300M for Barbie a Good Investment?
RockWater Roundup
RockWater analysis to make you a better investor and operator. Today we discuss the math for digital IP roll ups, and if $300M for Barbie was a smart investment (yes it was!).
The Math for Digital IP Roll Ups
by Chris Erwin
Many investors want to roll-up YT channels, podcasts, meme accounts.
Some math to explain how they work…
1st year assumptions:
• 5 to 10 acquisitions (1 tentpole, rest subscale)
• $40M combined revenue
• Not profitable
• Buy at 2x revenue ($80M)
Add another $10M for working capital, growth investment, transaction costs.
Now $90M total investment. Then over next 2 yrs:
• Grow revenue 30% YoY
• Get to profitability
Now at $70M total revenue.
Valuation grows to 4x revenue ($280M) since profitable, better capital markets, and industry returns to growth. That’s >3x the $90M investment.
Can add >3:1 leverage since now have FCF for debt coverage. Use to pay back equity investors incl dividend, and continue scaling.
Or 100% sale to PE or strategic.
Now, there’s a lot more to this roll-up strategy. Can add leverage sooner, more M&A, what if multiples don’t expand, growth sequencing, cash / equity purchase, etc.
That’s where RockWater Industries can help. Contact us if you want to talk more.
Was $300M for Barbie a Good Investment?
by Chris Erwin
I saw Barbie last weekend. Fun!
But, was the movie’s $300M budget good business? Let’s look at data…
– $337M global BO for opening weekend
– $145M prod budget
– $150M+ mktg budget
– 274M views of #barbietok
– 642k ig posts of #barbiemovie
– July Barbie doll convention sold out
Yes, this is a resounding success!
Assuming 50/50 BO theater split, there’s a clear path to profitability.
And the movie captured the zeitgeist. EVERYONE is talking #barbie.
Means the BIG win will come from Barbie and Mattel toy sales → I predict 2023 back to school and holiday revenue to be off the charts.
Other things about the movie campaign that stand out…
– Modernized Barbie values. Will re-engage old fans, recruit new ones
– Nostalgia / collectibles / resale mkt is up big. Shows very deep fandom
– Heavy Mattel branding push in storyline. Will build consumer affinity with parent co, help cross-sell non-Barbie toys
– How the release of Barbie the Album became its own event, featuring 17 original songs from global superstars, and adding to audience buzz about the film opening
And one other biz insight thing I’m tracking…
The patriarchy theme is heavy. And coupled with a strong meditation on current male fragility.
TBD how will resonate with conservative-value consumers. Just see the Pride campaign lashback from Bud Light, Target, etc.
Any of you also participate in Barbenheimer? Your takes?
…Alright, this is “Kenough” writing for a Monday morning!
If these insights are relevant to projects you’re working on, ping us here. We love talking all things media x commerce!
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