Inside UTA’s $230-Million Gaming SPAC: Is Hollywood Seeing a Future Beyond Movies and TV?

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“Power brokers in traditional media markets are recognizing the monetary potential within gaming,” one industry analyst says

gamer boy with hand holding the joystick controller electronic for playing game with online network connection technology device in esport tournament challenge concept

It’s not about the dollars, but the direction: In the wake of UTA’s announcement last week of a $200 million SPAC to pursue more acquisitions in the gaming space, industry analysts see the Big Three talent agency’s move as a bright neon arrow pointing toward a new arena for Hollywood investors previously focused on traditional movie, TV and streaming content.

UTA Acquisition Corporation, a special purpose acquisition company or “blank check” company targeting businesses in the gaming, digital media, creator economy, entertainment and technology industries, announced last week that it has closed its initial public offering for $230 million. The units are listed on the Nasdaq Global Market (“Nasdaq”) and began trading under the ticker symbol “UTAAU” on December 2 (on that date, UTA announced the SPAC IPO valued at $200 million).

“The move is indicative that power brokers in traditional media markets are recognizing the monetary potential within gaming,” Ross Benes, an Insider Intelligence senior analyst who covers video, TV and gaming.

David Chidekel, a partner at Early Sullivan Wright Gizer & McRae who advises clients in the media and entertainment industries, told TheWrap that $200 million — or even $230 million — is hardly a staggering sum when it comes to Hollywood deals — it’s roughly the budget of one summer blockbuster movie (“Black Widow” and “Tenet” both clocked in at $200 million). And the amount pales compared to the multibillion-dollar tech-related M&A deals that have dominated Hollywood in 2021 (Amazon gobbles up MGM for $8.45 billion; AT&T forges a $43 billion deal to merge WarnerMedia with Discovery.)

However, Chidekel said UTA’s big move into gaming indicates a realization that the gaming space is becoming the hottest platform of entry for content creators to develop their voices, even if those voices eventually find themselves working in traditional movies, TV or the music business.

Perhaps instead of ascending to positions of creative control via a studio job or a TV writers’ room, some creators might enter the door, or create a new character or franchise, through gaming, Chidekel said. “Technology has changed the way people create content,” Chidekel said. “Before, traditionally, a person would go to school and learn how to write screenplays … There was like this sort of traditionalist thinking of, you want to be a photographer, you have to learn how to do that. You want to you want to be a musician, you have classical training and learn how to read music. And what happened is that technology just kind of blew that out of the water.”

Added Chidekel, “The metaverse that everyone’s talking about — that is, meta-Mark Zuckerberg — is not new. If you’re in the gaming community, you’ve known about this for a long time.”

Indeed, many creators are now finding that tech skills may count as much if not more than traditional storytelling abilities. “If you want to make films, you better be a coder,” Chidekel said, only half-jokingly. “Like you better know how to write code instead of how to write a traditional script.”

UTA declined TheWrap’s request for comment on its new SPAC. However, the wording in an SEC filing leaves no doubt of the company’s longer-term goals. “We believe that there are a wide range of opportunities in gaming and related areas of digital media, the creator economy, entertainment and technology,” the filing says. “The strategic landscape in our areas of focus is evolving rapidly, as the traditional value chain across creators, developers, publishers, distributors and other key constituents has experienced significant disruption.”

Continues the statement, “We believe a number of underlying dynamics behind this disruption create a need for investment capital to fund growth and meet increased demand and that our management team is well-positioned to evaluate potential targets. We believe a number of these key trends will attract an expanding universe of content creators with whom we have differentiated access via the relationships of our management and our sponsor.”

While UTA indicates a specific eye toward locating new content creation talent, many investors in and out of Hollywood recognize that gaming is seizing an increasingly big share of entertainment spending. According to Statista and other sources, in 2020 the video game industry was second in revenue only to TV estimated worldwide revenue, raking $160 billion to TV’s $400 billion — admittedly a wide gap, but substantially higher than movies ($45 billion, although the figure is from a pandemic year where theatrical box office revenue was decimated).

David Offenberg, an associate associate professor of finance at Loyola Marymount University focusing on the entertainment business, noted the recent spurt of M&A activity around gaming — including Netflix’s July announcement that video games will be available to monthly subscribers going forward. “Companies with no history in gaming are investing big, and it’s not just Netflix,” Offenberg told TheWrap.

Benes said the value of gaming as an investment over traditional Hollywood content depends on the point of view of the stakeholder. “Advertisers view TV, cinema and streaming as more important than gaming, given that they spend much more money on the former than the latter,” Benes said. “And most large media companies don’t invest in gaming the way they do in movies and TV. But consumers value gaming, and they fork over more money on games than they do on TV and movies. Gaming is enticing because, unlike several other media formats, gaming’s popularity is growing with youth.”

However, Benes cautioned that the rise of gaming as a content platform should not be confused with a the separate field of esports — competitive, organized video gaming often watched by non-competitors as an event. “(Live) sports are still way bigger than esports in terms of viewership and the revenues they generate,” Benes said. “Gaming overall has become more popular, but there is no gaming spokesperson who is as widely recognized as sports stars like Serena William, Tom Brady or Shohei Ohtani.”