Entertainment asset class supports robust cash flows: Justin Deimen, Aurora Media

Justin Deimen, 2nd from left, with the BeachTV team.

Singapore-based Aurora Media Holdings, a media and entertainment asset investment vehicle with a corpus of $30 million, is focused on making content an asset class by establishing innovative and efficient media financing packages.

In an interview with DEALSTREETASIA, Aurora managing partner, Justin Deimen said: “We’re looking at a seven-year cycle on the funding but with options of extending life cycle on subsidiaries and IPs that we can cultivate and grow. This was the main consideration why we adopted an investment company structure.”

On the relationships with their limited partners (LPs), Deimen added, “We’ve had to establish years of training and education in the investment sector to position media and entertainment assets as investment-grade by marrying corporate finance capabilities with the industry. It’s traditionally not been an industry with much data, especially in Asia, so part of what we have done is demystify and refine the process from investment to recoupment.”

“It’s a non-cyclical and robust industry when derisking mechanisms are implemented early on, which has not been done in this region due to the lack of knowledge or entrenched practices led by status quo. Creating realistic valuation models of IPs and content is key towards either a sale or listing strategy on top of creating cash-flow positive investments. This offering is unique in the Asian context as it offers a good diversification to traditional investment portfolios for investors looking for high upsides alongside steady interest rates through mezzanine structures,” he adds.

Edited excerpts:

Looking at Southeast Asia and Singapore, what’s your take on the media startup ecosystem?

There’s opportunity in the region from a rising appreciation (monetarily as well as in attitude) of content and licensing. The key for startups is to prioritise a content strategy as it also creates a standalone revenue stream in most instances and creates actual value and asset in the company without needing to spend much.

Tech startups also need to see that content is not a secondary and tertiary element in their strategy and many times, good and/or pervasive content can drive engagement. We see the opportunity in content as the valuation models are being refined and as licensing deals are being consolidated and aggregated.

What is the philosophy that underlies the current investment strategy of Aurora Media? Any take on the role and impact of how the recent uptick in AR/VR investments will impact your investment thesis?

We are producers first and foremost and have to take a look at the entire ecosystem and value chain of how media and entertainment assets are developed, financed, produced and distributed/valued. We invest in products and projects that have scale in an audience, so relative to budget, we work in regional and international marketplaces.

While content is the lifeblood of what we do, we have a portfolio strategy to ensure that the long-term well-being and valuation of our assets are synchronised through the value chain. We look at everything from the underlying creative IP to the overall production and delivery infrastructure.

AR/VR investments will stem in how IP is created and licensed and the distribution strategy of the product. In this view of AR/VR, we work very closely with brands and media agencies in hammering open a commercial use of the project through recognisable IPs, franchises, characters and stories.

Media products are an amplifier. They drive traffic, generate leads and allow ecosystem perceptions to be influenced in terms of the narrative. What should investors be aware of when dealing with media assets? What are some of the challenges and also the opportunities that come with them? 

Media products and assets are a great amplifier — part of a wildcard industry as I like to call them. This is why we’ve had success in bringing in investors from all sorts of backgrounds both personally and professionally as they don’t take away from any core businesses but create more opportunities for branding and awareness of their primary business and profiles.

Brands have used entertainment products like movies and television to evangelise but we’ve also seen that in many cases, it’s been mishandled as creatively they don’t hold water. Our approach is always to create and invest in successful commercial ventures first and then look at avenues to spin off the venture into more ecumenical applications of media assets.

Digital media startups have recently seen a retreat in terms of funding. What’s your take on the underlying rationale for this development? Are we seeing this in the Asia Pacific and Europe?

Going niche is key in our territories as the localised products are still catching up to the rest of the world. We’ve seen great leaps in digital media start-ups who’ve been focused on primary verticals that spring off into different silos which again points to evidence of scalability.

REV Asia has recently seen a decent measure of success in focusing on consolidation of content as well. We have invested in BeachTV, a lifestyle platform that focuses on a niche sector of beach-related content while creating the ecosystem of digital and physical touchpoints that we will be scaling into merchandising and e-commerce within the year.

Structuring film financing deals is a niche area of investment. Can you explain how investors can access this niche and how they generate returns? What’s the risk/return profile associated with funding a media production or launching a content platform?

We have been quite open with our time and knowledge in this area when educating different institutional investors and fellow producers.

The other hat that I wear is that I run the Southeast Asian Audio-Visual Association, the largest trade group in ASEAN focusing on media investment and creative producing and part of that role entails running large trade events like ScreenSingapore and the Southeast Asian Film Financing Forum that train filmmakers and investors in how these deals work and where the recoupment avenues in the industry are situated.

Many projects with large budgets are covered through money that does not need recouping through co-production deals with other countries, and put together through distribution output deals — many of the projects we’re involved in or source already ensure that production budgets are offset before the project is released commercially.

The entertainment industry offers an attractive risk/return profile and a low correlation with the equity and bond markets. Movies, television and other content classes provide strong, predictable cash flows and are a stable, yet high yielding, asset class particularly when organised around a well-diversified managed portfolio.

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