Now that Candle Media’s shine has dimmed further with the sale of its majority stake in Hello Sunshine, new questions are being asked about the company’s future.
Financial details of the deal for Reese Witherspoon’s company, which she is buying from Candle in partnership with French company Mediawan, have not been disclosed. But a veteran financier familiar with the transaction told Deadline that it likely represented a loss of several hundred million dollars for Candle. The main culprits: a $900 million valuation when the company took a majority stake in Hello Sunshine in 2021 – an exorbitant level given its output and lack of profitability – and dramatic changes in the media landscape of late.
Five years ago, Candle was born with $2 billion in backing from private equity stalwart Blackstone. At the time, the industry was in the midst of a streaming frenzy, and the company had two titans at the helm: co-founders Kevin Mayer and Tom Staggs. The two men had spent years together in high positions at Disney, helping to pull off major M&A deals such as the acquisitions of Pixar, Marvel and Lucasfilm and the whirlwind merger with Capital Cities-ABC that brought ESPN into the fold.
Today, industry observers are wondering whether the next logical step for Candle would be to strike a deal for the company’s largest remaining asset, children’s entertainment powerhouse Moonbug. After all, private equity firms view their funding and portfolios in terms of returns over multiple years, not decades.
Moonbug, which produces CoComelonis in better financial health than many of its peers. But the nearly $3 billion Candle paid to acquire it set the bar high. A source familiar with Mayer and Staggs’ strategic thinking says a deal to spin off the company is not imminent but has been actively explored. As it consolidated, Candle downsized and restructured itself, moving from its origins as a buyer of assets to primarily as an operator of them.
‘CoComelon’
Netflix
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A representative for Candle declined to comment when contacted by Deadline. Blackstone did not respond to a request for comment.
The challenges for private equity-backed players extend well beyond the entertainment sector and stem largely from rising interest rates. In an article on the increasingly precarious situation of small and medium-sized private actors, published Tuesday in parallel with the Hello Sunshine newspaper, THE Wall Street Journal quoted a banker as saying the situation was 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 is putting a strain on many companies like Candle, as they must try to sell assets at even higher levels to account for the rate difference. However, for those in the media industry, demand for streaming programming is also receding as Netflix and other players tighten their belts and the industry braces for the impact of the Paramount-Warner Bros. merger. Discovery. Skydance, their new parent company, is promising at least $6 billion in savings tied to the deal. Podcast platforms, which were once spending money, have also reduced their spending.
One of Candle’s first investments, along with Hello Sunshine, was a minority stake in Will Smith’s Westbrook production company. 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, earning him a 10-year ban from the Academy of Motion Picture Arts and Sciences. With Smith returning to lead roles, the episode added another wrinkle to the already difficult task of making money in film and television production.
Alongside Westbrook, the company has invested in Spain-based Exile Content Studio and social media storytelling company ATTN:.
No one who has done business with Mayer and Staggs or is familiar with the company’s operations blames them personally for the company’s difficulties. It just seems to be a matter of unfortunate timing.
Given their largely charmed backgrounds at Disney, where each served a tour of duty in the company’s strategic planning division before rising to higher positions, both are sought-after and respected executives. Even after Candle was founded, the two men were retained by former Disney CEO Bob Iger as consultants. David Zaslav brought Mayer in as he was close to finalizing the Warner Bros. merger. Discovery in 2021. Building on the expertise he developed at Disney overseeing the launch of Disney+ and leading a number of sports initiatives, Mayer also served as president of sports streamer DAZN immediately before Candle’s launch.
“We moved aggressively,” Mayer said of Candle during an appearance on a panel moderated by Deadline at the Zurich summit last month. “When I thought about what I wanted Candle to be, I wanted it to be a media company with a modern setup, with a flywheel around great storytelling told by great storytellers.”
Candle spent about $4 billion on acquisitions, Mayer recalled, remembering how different that spending is from the massive level of Disney and other giants. “There’s probably a certain minimum scale that you need to have an impact,” he said.
Moonbug, despite accounting for three-quarters of Candle’s spending, is an important property in the YouTube-driven creator economy. At the Zurich conference, Mayer emphasized that CoComelonThe Netflix incarnation was the streamer’s most popular title from 2021 to 2024. (It has since dropped and moved to Disney+.) The company’s YouTube channel gets 13 billion views a month, he said, more than all of Disney, including ESPN, and four times more than MrBeast.
“There is no doubt that they would look to do a deal if they received a good enough offer,” says one investor. “But in today’s climate, is anyone going to come forward to make that kind of offer? That’s really the question.”
For Mayer and Staggs, despite their excellent reputations, “it’s going to take a while for people to get over it,” the investor added. “Although this company may have a short memory if the money is enough.”
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