The Global Media Weekly for executives and entrepreneurs

What will Cannes Lions become?

Everybody is watching Ascential. The UK listed B2B company (previously known as EMAP and Top Right Group) has started out on its new adventure. It’s 16 years since the former EMAP Plc rewarded its disgrunted investors with a stunning £2bn breakup auction. Ascential has done even better with the sale of WGSN trend forecaster (to APAX private equity) and its Flywheel Digital eCommerce business (to Omnicom), each for about £700mn. After 12 years of gutsy acquisitions and divestments, CEO Duncan Painter has gone off to head Flywheel. He’s proved that Ascential (with the remaining listed company) really was worth some £3bn in total – at least double the shareholders’ valuation for almost a decade. 

At those values, Painter’s Ascential strategy can hardly be described as a failure. Unlike the former EMAP’s disastrous, risk-everything 1998 acquisition in the US, there is no single reason for for the latest breakup, beyond the simple fact that shareholders had become stubbornly unconvinced by the strategy – not helped, of course, by the pandemic freeze on events. Although a failure to understand is often a two-sided miscalculation, the consistent ultra-bearishness of Ascential shareholders during almost two years of breakup speculation had become difficult even for some hedge funds to understand. 

Ascential paid the price (literally) not for mis-managing its three groups of excellent B2B assets (even though some of the eCommerce acquisitions had, inevitably, been pricey) but for failing to demonstrate the benefits of their common ownership. That’s why they are now three separate businesses. 

It’s down to just one to try and maximise its potential in public ownership.

Welcome to the ‘new’ Ascential, the listed operator of two “super” B2B events: Cannes Lions (acquired by the former EMAP in 2004) and Money 20/20 (acquired in 2015). The company has a current enterprise value of £1.4bn and is expected to generate revenue of £210mn and EBITDA of £69mn in 2024 with some 5-8% growth next year.

These are two of the largest B2B festivals but whether they have any more of the unifying rationale than their former parent is for another day.

Cannes Lions is something special.

This year is a host of anniversaries for the hugely versatile event. It was launched 50 years ago, moved permanently to Cannes 40 years ago (after alternating with Venice) and was acquired by EMAP 20 years ago. Soon after it was bought for £52mn (7x EBITDA) in 2004, Phil Thomas took over its management. The former journalist who had joined EMAP almost 40 years ago is now CEO of the “new” Ascential Plc. It’s a big year in more ways than one.

The Cannes Lions International Festival of Creativity is the largest and, arguably, the most prestigious event in the advertising, media and marketing industries, attracting some 10-15k attendees to to the French Riviera to eat drink, network and celebrate the year’s best work across five days. Like many other B2B events, Cannes Lions in 2022 was a picture of joy for delegates returning after a frustrating two years of Zoom; the rebound has been stunning. But this is no ordinary trade show trying to diversify beyond exhibitor revenue.

Awards, trade show, education, data and much more

In addition to an endless roster of star-studded parties, seminars, and awards presentations, Cannes Lions is an all-action event with plenty of educational and entertainment opportunities online and in-person. It’s careful to mix real-life learning with the fun and fizz. But nobody doubts that the magic are the Lion awards themselves, across 30 categories in nine ‘tracks’ from Entertainment, Engagement, Health, Publishing and Games to Film Craft and Creative Business Transformation. The organiser tells would-be entrants that “Winning a Lion is a career-defining achievement. Your chance to share your work with the world, and get deserved recognition from your global peers. Your moment to make history”. That’s not too much of an exaggeration to judge by the universal appeal of the event and the way that Cannes Lions winners publicise and promote their success for years after.

It has always enjoyed high profit margins which had prompted UK-based advertising data service WARC to mark the 2004 acquisition with some stinging observations: 

“But, even given the eye-watering prices charged ($3,800 per single delegate; $1,000 for each TV commercial entered), few attendees at adland’s annual soirée in the sun realised that the event notches a profit margin of which even the tightest-run advertising agency can only dream! The extent of that margin came to light only after the event’s founder and organizer Roger Hatchuelsold his platinum property to British media group EMAP for £52.5mn. It seems that this year’s Lions generated revenues of £11.96m) on which the profit margin was nearly 60%.”

Ironically, WARC itself was later acquired by the renamed EMAP. 

But, beyond the entertainment and hospitality luxury of Cannes Lions, the profits reflect the longtime track record of the Riviera city’s local authority which has built a portfolio of major festivals (starting with the Cannes Film Festival in 1946). The venue costs are, to some extent, subsidised by the city’s earnings from hotels, restaurants and hospitality yachts.

When Reed Exhibitions (now RX) acquired the £10mn-revenue Midem (organiser of the eponymous music festival and also Mipcom broadcast/TV) for £30mn in 1989, it was believed to have profit margins of 40% and to account for some 5% of Reed’s trade show revenue but 10% of the profit. Subsequently, it grew to be 10% of revenue and 20% of profit. This was after RX grew through further acquisitions. Everybody wants to be in Cannes.

The stats (some of which are our own estimates drawn from Ascential filings) tell the story of Cannes Lions that – despite expansion in the number of categories – last year had 34% fewer awards entries than in 2017. But entries came from 80 countries and EBITDA margins are (almost) as high as ever:

Cannes Lions*
£mn
SnapShot
2023202220212020201920182017
Revenue10280  75105100
EBITDA4836  383840
Margin47%45%  50%36%40%
Awards entries27k25k29k25k31k32k41k
*Flashes & Flames estimates 
2020-21: no live events during the pandemic

What’s notable is the changing profile of revenues. In 2018, no less than £79mn (75% of all revenue) was almost equally accounted for by delegates and awards entries. By 2023, these two groups were £44mn (43% of revenue), with awards entries down from £39mn (37%) to £15mn (15%). The largest share of revenue came from sponsorship £39mn (38%) in 2023 v £25mn (24%) in 2018. Other revenue (including subscriptions to The Work database and advisory services) last year accounted for £19mn (19%) of revenue – that was nil back in 2018. Aside from the evident reduction in the oft-critcised costs borne by awards entrants and delegates in Cannes, the diversification of revenue has clearly strengthened the festival’s performance.

Cannes Lions is the centrepiece of what is increasingly referred to as the Lions group of the slimmed-down Ascential. It includes WARC (advertising data), Contagious (agency pitches) and Acuity (price consulting). WARC has been part of Ascential since 2018 but Contagious was acquired in 2023 and Acuity has recently been transferred from Money 20/20. On a pro forma basis, the Lions group 2023 result was £131mn revenue and £56mn EBITDA, with subscription and advisory services together accounting for 30% of all revenue. The £23mn-revenue WARC generates £6mn profit (28%) – almost doubled since its acquisition six years ago.

The re-worked 2023 financials for the “new” Ascential show that Cannes Lions revenue grew by 30% but Money 20/20 by only 1%. With investment analyst warnings about “disruption” in fintech, the marketing events, information and consulting (which accounted for 64% and 68% of “new” Ascential revenue and profit in 2023) may generate more than 75% of Ascential profit this year. That will prompt calls for Phil Thomas to accelerate the Lions activity – and (maybe, ultimately) to divest Money 20/20. He knows.

But the challenge of growing Cannes Lions is spelled out in the financials: 2023 revenue was up 25% up on the previous (pandemic bounce-back) year but not yet back to 2018, almost record profit margins, and awards entry volumes relatively low by historic standards. There can be no doubting that the expansion of Cannes Lions to include high-growth segments like luxury and gaming and the increased presence of the digital behemoths show the event is gaining momentum and that the record sponsorship revenue may still have a way to go. But it seems clear enough also that the Lions group must still find new areas of revenue growth. They can’t depend on the event itself – and that’s not even thinking about the potential headwinds of sustainability. All those flights and floating parties in the marina…

The CEO makes the point that only some 46% of Lions revenue is directly connected with the activity in Cannes. That is “proven” by the fact that the awards entries and sponsorship revenue was delivered during the pandemic, even when there was no live event.

Two things point the way towards a new growth strategy.

First, the Lions group generates increasingly significant consulting revenues through WARC, Acuity, Contagious and The Work.

Second, the group has an estimated 20k subscriptions (and growing at c15% annually), led initially by WARC. And The Work – launched six years ago – is a treasure trove of data from Cannes Lions entries. Entrants spend tens of hours in order to prove the effectiveness of their creative campaigns – and win a coveted, career-enhancing and business-boosting Lions award. High ranking international juries judge the Lions candidates with academic rigour. This is no “baker of the year” personality contest. If Hollywood’s Oscars are the ultimate awards competition (because the performance of a whole industry depends on them), Cannes Lions really is not far behind. That’s why online clients of Cannes Lions’ The Work pay year-round to access the knowledge and learn from the winners.

Ascential’s Lions group may soon decide to bring together these non-event resources (creating a single Lions branding, instead of WARC etc would be a good start). It could then focus on the education possibilities for marketeers, so many of whom already depend on the resources and accreditation of the Cannes Lions awards for much of their Continuing Professional Development. It’s staring Ascential in the face.

Executives must have been all over the hugely successful “mini MBA in marketing” which accounts for a growing proportion of the UK-based Centaur Media‘s profit. It’s been a smart transformation for the one-time B2B magazine publisher.

Online education is booming across the world and the Lions team is perfectly placed to create highly-rated courses and qualifications for its own global audience.

It could be a great opportunity for the “new” Ascential – and the low-growth revenues of Cannes Lions itself may inject urgency into the task. Phil Thomas (still wrestling with the stockmarket aftermath of corporate breakup) will not need reminding of the risks of failing to act quickly to appetise shareholders and build a path to longterm growth. Once he has completed the task of returning proceeds to shareholders, the CEO might get serious about Centaur (itself steeped in marketing industry data). Will he launch an online “Lions University of Marketing” or acquire Centaur (enterprise value: £65mn) as a catalyst? Or both? It could be a fast start.

Ascential Plc