Now that Candle Media has lost further luster with the sale of its majority stake in Hello Sunshine, new questions are being raised about the company’s future.
The financials surrounding the deal for Reese Witherspoon’s company, which she is buying back from Candle in partnership with France-based MediaOne, have not been disclosed. But a veteran financier familiar with the transaction told Deadline it likely represents a loss of several hundred million dollars for Candle. The main culprits: a $900 million valuation when the firm took a majority stake in Hello Sunshine in 2021 — a high level given its output and lack of profitability — and recent dramatic changes in the media landscape.
Five years ago, Candle received $2 billion of backing from private equity mainstay Blackstone. At the time, the industry was on a major streaming binge, and the company had two veterans as co-founders Kevin Mayer and Tom Staggs. The two had spent years together in senior positions at Disney, helping close major M&A deals like the Pixar, Marvel and Lucasfilm acquisitions and the Thunderbolt merger with Capital Cities-ABC, which brought ESPN into the fold.
Today, industry observers wonder whether the next logical step for Candle would be to make a deal for the company’s main remaining asset, children’s entertainment powerhouse Moonbug. After all, private equity companies view returns on their funding and portfolios within years rather than decades.
moonbug, which produces commelanIs in a better financial position than many of its competitors. But the nearly $3 billion given to achieve this has set a high bar. A source familiar with Mayer and Staggs’ strategic thinking says a deal to spin off the company is not imminent, but is being actively considered. As it reorganized, Candle has cut headcount and restructured from its origins as a buyer of assets to primarily an operator of them.
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A Candle representative declined to comment when contacted by Deadline. Blackstone did not respond to a request for comment.
The difficulties for private equity-backed players extend far beyond the entertainment sector, and stem primarily from high interest rates. In an article about the increasingly vulnerable position of small and medium-sized private players published on Tuesday in parallel to the Hello Sunshine news, wall street journal quoting a banker That being said, the situation is approaching a “period of reckoning”. As money returns to the sidelines, private equity fundraising is on track for its worst year since 2020.
The rate-driven increase in the cost of borrowing money is troubling many companies like Candle, seeing them try to sell assets at even higher levels to make up for the difference in rates. However, for those in the media business, demand for streaming programming is also waning as Netflix and other players tighten their belts and the industry braces for the impact of the Paramount-Warner Bros. Discovery merger. Skydance, their new parent company, is promising at least $6 billion in cost savings related to the deal. Podcast platforms, once cash-strapped, have also cut their spending.
One of Kendall’s early investments, along with Hello Sunshine, was a minority stake in Will Smith’s production company Westbrook. Less than three months after that deal was announced in January 2022, Smith became an industry pariah after slapping Chris Rock on stage at the Oscars, and was given a 10-year ban from the Academy of Motion Picture Arts and Sciences. While Smith returned to starring roles, the episode added another complication to the already difficult task of turning a profit from film and TV production.
Along with Westbrook, the company invested in Spain-based Exile Content Studio and social media storytelling firm ATTN:.
No one who has done business with Meyer and Staggs or is familiar with the company’s operations blames them personally for the company’s struggles. It just seems to be a case of unfortunate timing.
Given their largely charmed tenures at Disney, where each served a tour of duty in the company’s strategic planning division before rising to senior positions, both are sought-after and respected executives. Even after founding Candle, the pair were retained as advisors by former Disney CEO Bob Iger. David Zaslav brought in Mayer as he was about to close the Warner Bros. Discovery merger in 2021. Building on the expertise he developed at Disney while overseeing the launch of Disney+ and leading multiple sports initiatives, Mayer also served as president of sports streamer DAZN just prior to the launch of Kandel.
“We moved aggressively,” Mayer said of Candle during an appearance on a deadline-driven panel at last month’s Zurich Summit. “When I thought about what I wanted Candle to become, I wanted it to be a modernly configured media company with great stories told through great storytelling.”
Mayer recalled that Candle had spent about $4 billion on acquisitions and wondered how this outlay differed from the vast scale of Disney and other giants. “You probably need a certain minimum scale to have an impact,” he said.
Moonbug, while accounting for three-quarters of Candle’s spend, is a massive asset in the YouTube-driven creator economy. Mayor mentioned this at the Zurich conference commelanNetflix’s Avatar was the streamer’s most popular title from 2021-2024. The company’s YouTube channel gets 13 billion views every month, which is more than all of Disney, including ESPN, and four times more than MisterBeast.
“There is no doubt that if they get the right offer they would want to do the deal,” says one investor. “But in today’s environment, will anyone come forward to make such an offer? That’s really the question.”
As for Mayer and Staggs, despite their excellent reputation, “it’s going to take some time for people to get over this,” the investor said. “Although if the money is right this business may become a less memorable one.”