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The two explained the staggering valuation they placed on a company that has produced hits like HBO’s “Big Little Lies,” Hulu’s “Little Fires Everywhere” and Apple TV+ series “The Morning Show” — but doesn’t actually have an extensive library of content that it owns. And they talked up the e-commerce strengths, and potential, of Reese’s Book Club with its 2.5 million subscribers.

Hours after the deal was announced, TheWrap caught up with Staggs and Mayer to talk about how Hello Sunshine’s multifaceted approach to media consumption fits their goals of creating a “well-balanced future-proof” media company. (Just don’t call it a studio.)

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The following interview has been edited and condensed for clarity.

How do you get to a $900 million valuation on a production company that doesn’t even have an extensive library of content? What kind of cash flow do they have?

Kevin Mayer: Look, it’s not a production company, first of all. It is a pretty well-configured, multiple business-line company, and is really a next generation company. Yes, it has production assets. It does film and TV, it has podcasting, it has e-commerce and direct-to-consumer through the book club and other brands that they’re establishing. It’s really a combination of content, commerce and community.

If you pull all those experiences together, that digital connection that you can have with consumers and the power that being an influencer, with followers with whom you can engage very authentically; we really think that Hello Sunshine is on to that. That opens up avenues for other monetization paths, that we broadly call e-commerce and social commerce — that’s a really big part of this. So it’s really not just a production company. We think that those additional revenue streams and that sort of next generation footprint that they have is super crucial.

We’re not confirming any pricing on this, but it’s certainly worth a lot. And we’re happy to start our business off with them as the as the foundational piece.

When you say the IP, what IP do they have?
Mayer: They have access to IP through the book deals that they do. They have a very substantial early look into books through the book club. They’re able to option IP in a way that others can, but they’re incredibly good at it. They understand really well, through their direct-to-consumer relationship with 2.5 million subscribers, what their audience loves and what will work. When you buy the option to it, then you control it. That’s essential in getting better deals done with the ultimate buyers of the product.

Tom Staggs: They really do a great job of attracting talent. We’re gonna bring more capital to the equations and give them an enhanced ability to do that, but that vibrant creative flow is an important part of the equation also.

When you say capital, what’s the capital behind it?
Staggs: That’s Blackstone.

Has Blackstone already pledged a certain amount of capital? Is there a specific fund for developing IP or developing projects?
Staggs: They said they’re ready to put substantial capital in place — $2 billion against this — but they’re doing this out of their Flagship Fund, which is $26 billion. So there’s ample capital.

Mayer: I think that’s the starting point. They have a large number of very well capitalized, limited partners. And there’s a model where you can bring that capital in alongside Blackstone, often really easily. Access to capital is not going to be the problem.

How much does Reese mean to this deal? In other words, if Reese decided she wanted to just retire and just make movies, if she got tired of running a business, how would that impact the ability of Hello Sunshine to sustain that authenticity that you talk about?
Staggs: Reese is really important to Hello Sunshine, she’s important to this deal. She’s also committed to staying with it and is excited and energized.

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How many other companies do you anticipate that you’re looking at doing a deal like this?
Staggs: There’s a number of them that are interesting and we’ve got varying stages of discussions with several. That doesn’t mean that any of those will get done. But at the same time, we think there’s real opportunity here. We really think that there’s the opportunity to pull together a really forward-looking independent content, technology and social commerce company that is built for where the marketplace is, and is going. We see the opportunity and we’re excited about it. And we’re especially excited about this first step.

You’re buying Hello Sunshine, you’re looking at other companies that have this multi-pronged approach that beyond just pure content creation. Is this a new way of building up a studio or a new kind of content company amid this streaming revolution?
Mayer: We think the future of a well-balanced, future-proof media company would have the prongs that we’re pursuing here. More and more content consumption of video and entertainment is coming on the likes of TikTok and Instagram Reels. Now Snapchat has its short-form video. And unless you have a footprint that exists across all the spectrum of where people are engaged with video and entertainment content, you’re not going to be maximizing the value of what you’re building. We fully believe in that full spectrum, from shortest form content all the way to movies, we have to be there.

We want to monetize this thing in a multiplicity of ways, from direct-to-consumer, e-commerce, to doing an (executive producer) deal with Netflix on some of the stuff and ownership of some of the content licensing. So it’s kind of a full spectrum approach that we’re taking. To optimize success, you really need to think about the future of media in that way.

Is this the future of what a studio could be? I don’t know if I’d use that word. That, to me, is an indication of kind of an old-fashioned model. This is a new-fashioned model that we’re pursuing. And I honestly think this is where successful media companies will all gravitate towards, but we’re kind of leading the charge.

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