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B-Movie Mogul: How A Failed Telecom Titan Turned A Feel-Good Book Publisher Into A Streaming Media Star

Among pandemic success stories, few rival Netflix. Globally, lockdowns have helped push its subscriber rolls to more than 200 million and even better, it recently scored an impressive 35 Academy Award nominations. In the last 12 months its shares are up 49%.

But as giants like Netflix, Amazon and Disney battle at the top for streaming market dominance and Oscars, a little known entertainment company with a schmaltzy name, Chicken Soup For The Soul Entertainment, is on a tear, gobbling up lesser known streamers, film distribution and production companies, as its stock climbs higher. In the last 12 months, Chicken Soup’s o-t-c traded shares are up 289%— nearly six times as much as Netflix.

Ever heard of the television series Going From Broke, which is produced by Ashton Kutcher and offers reality TV-style budgeting advice to debt-laden Millennials? Or how about a movie called Willy’s Wonderland, which stars Nicolas Cage as a bad-ass janitor trapped overnight in a dilapidated funhouse, battling haunted animatronic mascots? 

Chicken Soup For The Soul Entertainment isn’t in the business to win Oscars, Golden Globes or Emmy Awards, but millions of viewers consume its programming thanks to savvy marketing and an opportunistic collection of streaming networks, distribution and production companies. Chicken Soup For The Soul Entertainment is a leader in the so-called AVOD or advertising-video-on-demand sector of the streaming entertainment business. Globally, advertising-supported channels streamed over the internet to laptops and smart TVs (instead of via cable or satellite) accounted for $27 billion in revenues in 2020 and is expected to grow to $56 billion by 2024 according to Statista. The industry giant is YouTube with its user-generated content, but there are a host of companies including Roku TV, ViacomCBS’s Pluto TV and Amazon’s IMDb Freedive duking it out with scripted content. The idea is that as cord-cutters become fed up with the costs of subscription streamers like Netflix, Hulu and Apple TV+, they will turn to free, advertising-supported channels like Chicken Soup’s Crackle, Popcornflix, Españolpix and FrightPix.

This morning, Chicken Soup, whose revenues amounted to a mere $68 million in 2020,  announced that it would be acquiring the assets of Hollywood’s Sonar Entertainment for what sources close to the deal estimate to be valued at $100 million. The transaction will give Chicken Soup ownership of a collection of television and film properties ranging from the Amazon Prime hit Hunters, starring Al Pacino, to animated film Alien Xmas, which appeared on Netflix, to the 1980s television miniseries Lonesome Dove and vintage programming like Hal Roach’s Little Rascals. In all, the deal includes a library of 372 television series and 700 films plus ongoing development deals with the A-listers like Ridley Scott, Jon Favreau, David E. Kelley and Jordan Peele. This will add to Chicken Soup’s existing library of 81,000 hours of film and TV content.

“With Sonar, as we move into 2022, we will have one new TV series or movie coming to our networks each week. That kind of pace has never been seen from an AVOD.”

Bill Rouhana, CEO, Chicken Soup for the Soul Entertainment

Chicken Soup For The Soul Entertainment is the brainchild of William Rouhana Jr., a veteran executive who last made headlines during the dotcom bubble when he presided over a debt-laden broadband juggernaut named WinStar, which reached a market capitalization of more than $4 billion before filing for bankruptcy protection in April 2001. Having learned dealmaking during telecom’s Wild West, the structure of the Sonar deal is vintage Rouhana. While the estimated price to the Canadian private equity seller Catalyst Capital is $100 million, $80 million of it is an earn-out from its television and movie assets, and the $19.5 million in cash Chicken Soup is fronting will be quickly recouped from Sonar’s receivables. As part of the deal, Catalyst will get a 5% stake in a new family-friendly advertising video on demand network that Chicken Soup is expected to create from some of Sonar’s assets.

“Bill is a talented dealmaker. He’s assembled a powerful platform in streaming video,” says investor Nicholas Galluccio of Rye, New York’s $1.8 billion Teton Advisors. 

When Rouhana first acquired Chicken Soup for the Soul in 2008, it was mainly in the business of publishing inspirational paperback books with titles like Loving Our Cats: Heartwarming and Humorous Stories about Our Feline Family Members and Chicken Soup For The Tea Lover’s Soul. It also was licensing pet food under the brand. The small California-based company had published hundreds of “user-generated” titles and had sold hundreds of million copies worldwide, but a divorce was pushing one of its founders to sell. Chicken Soup was generating cash, but like many small businesses, its financial statements were a mess. 

“Nobody else could buy it,” says Rouhana, 68, who moved company headquarters from Los Angeles to its current digs, above a CVS pharmacy in Cos Cob, Connecticut. “If you’re a private equity firm, you can’t buy a company without the audited financials…We did seven months of really serious due diligence. We actually traced all the cash.”

Rouhana’s plan was to leverage the Chicken Soup brand—and cash flow—to get into internet-based entertainment. “I felt like video on the internet was clearly a very important part of the future. I have believed that since 1993 when I first created WinStar. The whole point of it was to deliver video over our broadband network to people.”

For several years, Rouhana focused on producing two episodic television series, Hidden Heroes and Project Dad, both of which aligned with Chicken Soup’s family-friendly approach and eventually aired on CBS and Discovery, respectively. Then in 2017, Rouhana carved off his new TV and film business from book publishing and used the Obama administration’s Jobs Act Regulation A+ provision to raise $30 million in an initial public offering.  

After the IPO, it was off to the races for dealmaker Rouhana. In November 2017, Rouhana acquired Screen Media, a distributor with a library of 1,200 films and TV shows and owner of Popcornflix, an advertising video on demand app that itself had the rights to more than 3,000 films and 1,500 TV episodes plus 15 million active users. Less than a year later, in 2018, Chicken Soup bought Pivotshare, a subscription video on demand service, and soon after, Truli Media, a “faith and family-friendly” programmer. In 2019, it bought APlus, an online content media startup owned by Ashton Kutcher and launched its own production company, Landmark Studios, with offices in New York and Los Angeles. Its biggest deal to date has been its 2019 joint venture with Sony Pictures Television, which essentially gave Rouhana the keys to its Crackle streaming advertising video on demand franchise, including 10 million subscribers and 38,500 hours of programming from Sony’s library. The $40 million preferred stock deal included warrants that when exercised will give Sony a 23% equity stake in Chicken Soup. 

Not all of Rouhana’s productions are forgettable. In July 2020, his Screen Media division released The Outpost, a gripping military thriller based on a book by CNN’s Jake Tapper depicting the true story of a squad of army infantrymen assigned to a seemingly indefensible base during the Afghanistan War. The film, starring Orlando Bloom and Scott Eastwood, has a 93% rating from Rotten Tomatoes and held the top spot on video rental services like iTunes, Amazon and Google Play for weeks. It also became a hot summer rental through Redbox and Walmart, and in October 2020 it became available on Netflix—all the while generating revenue for Chicken Soup. Nicolas Cage’s low budget Willy’s Wonderland only scored an 80% on the Tomatometer, but its brisk Amazon Prime rentals pushed it past break even a month after its February release.

Chicken Soup’s results during the pandemic have been impressive as Rouhana has cut duplicative operating costs in the acquisitions he has rolled up. In 2020, Chicken Soup booked $68 million in revenue and $11.8 million in operating cash flow, up from $57 million in revenues and $6 million in cash flow a year ago. Last year’s results don’t include revenues from Willy’s Wonderland, which will hit 2021 financial statements in the first quarter. This year, Chicken Soup’s Crackle is targeting smart television partnerships, with brands like Samsung, Sony and LG. Rouhana has already inked a deal to have Crackle featured on millions of Vizio smart TVs and remote controls during the second half. The Sonar asset purchase should push cash flow in 2021 to an estimated $30 million and revenues to $115 million. 

Though Rouhana says he is committed to his second act as an entertainment mogul, his savvy dealmaker instincts may prompt him to sell given that ad-supported streamers have recently become targets as bigger traditional media companies claim stakes in the growing business. A year ago, Rupert Murdoch’s Fox Corp bought free, ad-supported streamer Tubi TV for $440 million and in 2019, Viacom snapped up PlutoTV for $340 million. Another big streamer in the AVOD business, Roku, whose revenues amounted to $1.8 billion in 2020, recently acquired the content of Quibi and home improvement programming mainstay This Old House.

“My plan is to keep building this for a couple more years,” insists Rouhana. “As we move into 2022, we will have one new TV series or movie coming to our networks each week. That kind of pace has never been seen before in advertising video on demand nor has an AVOD ever owned the amount of content that we will now own.”

Stay tuned. 

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