Content Partners' $400 Million Deal to Buy Revolution Studios Shows Even Old Content Can Sell

Media deals are expected to dominate the news in 2017, and it didn't take long for the first one to hit the wires.

It wasn't a huge transaction by the standards of AT&T's (T) announced $85.4 billion acquisition of Time Warner (TWX) , but little-known Content Partners plunked down nearly $400 million to buy the largely inactive Revolution Studios in a deal that proves that even old content can be king.

Revolution, started in 2000 by former Disney (DIS) and Fox (FOXA) studio chief Joe Roth, is only now returning to making films after a 10-year absence. The Santa Monica, Calif., company produced xXX: Return of Xander Cage, the third in a series of action films and the second starring Vin Diesel. The film is scheduled to be released by Viacom's (VIAB) Paramount Pictures on Jan. 20.

Content Partners' acquisition represents a quick exit for investment management firm Fortress Investment Group (FIG) , which bought Revolution in June 2014 for an estimated $240 million. Under Fortress, Revolution rolled up several smaller film finance and production companies to cobble together a library of 126 movies and more than 240 TV episodes.

But Fortress had been discussing a potential deal with Content Partners for some time, according to one dealmaker with knowledge of Revolution's finances. The firm retains media investments including New Media Investment Group (NEWM) , which has been consolidating local media assets in recent years.

A Revolution spokeswoman had no immediate comment. Fortress and Content Partners representatives could not immediately be reached.

Fortress shares rose 6% on Wednesday to $5.48. The stock was off 5 cents Thursday morning.

For Content Partners, which was launched in 2006 with the unique premise of buying the future cash flow of stars and musicians, the Revolution deal marks its second big transaction to transform itself from a financial boutique into a investor fund with production assets.

In 2013, the Los Angeles company, which started with the backing of billionaire tech investor Mark Cuban and his partner Todd Wagner, acquired the 50% stake in CBS (CBS) TV show C.S.I.: Crime Scene Investigation that was owned by an affiliate of Goldman Sachs (GS) .

The price of that deal was never disclosed, but at the time news reports said Goldman was seeking more than $400 million for its stake.

Revolution produced 46 films in its earlier life, including the Academy Award-winning Black Hawk Down, the Julia Roberts film America's Sweethearts, Hellboy and the initial xXx movies.

Its TV shows included the Charlie Sheen comedy Anger Management and Are We There Yet?

It produced its last movie in 2006 and its last TV show episode in 2014, according to the entertainment data site IMDb.

In recent years Revolution has tried to generate added revenue from its film library through new outlets. In May, it bought a stake in Latin Everywhere, a Latino digital service since renamed Pongalo, and licensed dubbed versions of its movies to stream on its over-the-top services. Revolution also is in the process of bringing its 2004 romantic comedy 13 Going on 30 to Broadway as a musical.

At the outset Content Partners, launched by talent agency executives Steven Kram and Steven Blume, had the backing of Dallas Mavericks owner Cuban and longtime partner Wagner. The latter is still listed on the company's website as a founding partner, but Cuban said via email that he is no longer a part of the company.

On its website, Content Partners says it purchases 50% to 100% of "back-end profit participations" from actors, directors, talent agencies and others in films that "have been theatrically released by major studios" as well as profitable television series.

The company has never disclosed which stars have sold participations.

This article is commentary by an independent contributor. At the time of publication, the author held positions in Disney, Viacom, CBS and AT&T.

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