Endeavor to Miss Universe: Bye-Bye?
It’s not a news that because of the ongoing pandemic that has captured the whole world, MUO has not made any announcement regarding this year’s Miss USA pageant yet. While there’s still no news about the feasibility of this year’s pageant, there’s something even bigger growing in the background. If this hits the Miss Universe Organisation (MUO), it could mean huge changes in the world of pageantry! This is a caution call about Endeavor (AKA WME-IMG), and its critical financial health.
When Endeavor (then known as WME-IMG) took over MUO, it seemed like the perfect solution to all the problems MUO was facing. It had a content production division that already had experience of producing the Miss Universe coronation night. It had been handling large scale events, so they knew how to handle the logistics. And it had a modelling and talent representation wing which meant it could open a lot of new doors for the titleholders. Although these things were true and did benefit the MUO titleholders in the past 5 years, one thing we didn’t pay attention to was the aggressive expansion that Endeavor group was going through and the effects that had on its other businesses. MUO itself was acquired by Endeavor as a part of its expansion plans. But it wasn’t the only asset they had acquired. Over the last 7 years Endeavor has acquired over 22 assets including some huge properties such as UFC, Professional Bull Riders and On Location Experiences. These acquisitions obviously didn’t come for free! The UFC acquisition alone costed it over USD 4 billion dollars. Currently Endeavor’s long term debt stands at USD 4.6 Billion and total liabilities at a staggering 7.2 billion!
A few months ago the situation still seemed manageable despite all the debt. Taking loans and expanding the business with a long term goal, is not a new business strategy. But the pandemic changed everything! According to the financial reports filed by Endeavor during its attempted IPO last year, the largest chunk of Endeavor’s revenue comes from its Entertainment and Sports division (this includes the MUO pageants) followed by the talent representation division. The pandemic had a direct impact on the entertainment and sports business because with restrictions on public gatherings, holding these events was not possible anymore. The talent representation business was also critically affected due to the pandemic since most of the on-going productions have been halted and upcoming projects have been postponed. With two of its main sources of revenue gone, Endeavor’s debt doesn’t remain just a long term problem anymore. In fact repayments for some of these liabilities will become due from next year onwards while the organization inevitably suffers unprecedented loss of revenue.
How does this affect the Pageant World?
As Endeavor has started inching towards the possibility of a bankruptcy, it might have to take some tough decisions in order to survive. These tough decisions will include divestment, meaning they will have to sell-off some of the assets to make up for the loss of revenue. In fact Endeavor must have seen this fate coming regardless of the pandemic. Because in the recent past, it sold off two of its assets on which it had already made profit – its stake in drga5 and 50% stake in IMG College. In the last 3 years, the only way Endeavor was able to make profit was through selling some of its valuable assets. As of now there’s no official word from Endeavor on which of its assets it is planning to sell due to the current financial crisis. In terms of its valuable assets, it’s most valued asset is UFC which it won’t sell as it holds the best prospects for Endeavor’s financial recovery in the future. That means its other assets that are doing well are on the chopping board right now. As mentioned earlier, Entertainment and Sports remains its most money making business. So it is very much possible that just like IMG College, next item of the selling list could be a property from the Entertainment and Sports portfolio. MUO is part of this portfolio. It’s been 5 years since Endeavor acquired MUO at an undisclosed price. It is safe to assume that it has recovered a substantial, if not full, amount of money it had spent on acquiring MUO. Plus at the time of acquisition, Endeavor had signed a five year deal with Fox for airing Miss Universe and Miss USA pageant, a deal that will come to an end after the upcoming Miss USA pageant. So it would not come as a surprise if Endeavor decides to sell the MUO as part of its restructuring. The only reason it may decide not to sell MUO could be that MUO, even though is valuable, won’t be able to bring as large sum of money as IMG College or Draga5 did. But if an interested party shows up with a good surplus on the MUO’s worth, Endeavor is likely to take the cash and bid farewell to MUO.
The next six months are going to be extremely critical for MUO and Endeavor. Endeavor has already started cost cutting measures and layoffs. It’s just a matter of time before we get to hear who is getting a final walk from the Endeavor group. MUO doesn’t seem to be planning to cancel this year’s pageant which is a very positive sign. But to be honest, Endeavor’s future doesn’t seem any brighter even if it survives the pandemic. The debt will keep on haunting it and with it’s credit rating being downgraded recently, getting newer investors and business partners will be very difficult. So maybe parting ways with Endeavor is exactly what MUO needs right now. Maybe instead of drowning with its parent company, MUO can cut loose and survive or maybe even thrive at a different home. One thing is for sure, owners have come and gone, but MUO has always stayed in the game. And it always will!
Author: Jinendra Aherkar
Picture Credits: Miss Universe Org.