Ryan Reynolds as a Service
Ryan Reynold’s is gaining a lot of attention in his second career as business mogul. His impressive accomplishments off-screen continues to grow. For those keeping count the actor-turned entrepreneur has grown his wealth and captured headlines for founding/owning the following:
- Maximum Effort: A film production and digital marketing agency
- Wrexham: A Welsh Football club acquired by Ryan Reynolds in November 2020
- Aviation Gin: A spirits brand acquired by Diageo in 2020
- Mint Mobile: A low-cost mobile network provider acquired by T-Mobile in March 2023
While there are varying reports of his ownership stake in each of these endeavors, it is safe to assume that they are sizable (25%+). These successes demonstrate the value of “brand” and story in the valuation of the companies he sold. For the record Aviation Gin sold for $610M USD and Mint Mobile for $1.35B. Both Diageo and T-Mobile bought solid assets. In both cases, a category behemoth stepped in and acquired a fast-rising, upstart brand. The price the pay reflect the power of brand more than the fundamentals (more on this later), but unlike other acquisitions, T-Mobile and Diageo bought the brand “Ryan Reynolds” versus the brand names listed on the term sheets.
Let me show you what I mean using the recent acquisition of Mint Mobile by T-Mobile as an example. One day after the acquisition, headlines came pouring in and here is what the top 113 Google headlines reveal¹ for the search term “Mint Mobile”.
Unsurprisingly Mint Mobile — the company being acquired — appeared in 87% of the headlines. “Ryan Reynolds” however appears in 46% of all the headlines, +10% more than the acquiring company, T-Mobile. There were also 5 headlines that mentioned Ryan Reynolds and did not even mention either T-Mobile OR Mint Mobile — how is that for brand equity!
The early winner of brand share here is Ryan Reynolds. This is good for Ryan Reynolds, and has potential to be good for T-Mobile too. The secondary effects of this dynamic will play out in the coming months, but I do want to call attention to the idea of Ryan-Reynolds-as-a-service.
The master play here is that Reynolds takes a sizable ownership stake. Along with that stake he becomes the face of the brand and its primary spokesperson. He also captures the production revenue associated with the development of the advertising and digital content. This creates an brand value that far exceed the fundamentals. It enriches Ryan disproportionately, but clearly he has something that these mega-brands need.
Let’s look at the numbers for the Mint Mobile² and T-Mobile. Let’s start with the total subscribers:
The reported revenue for Mint Mobile is over $100M. Given is year-over-year growth, I will boost that number to $150M in annual revenue for a back of napkin valuation. This gives the upstart company an ARPU of $50 compared to a $450 ARPU from T-Mobile customers.
This does not tell the whole story. There is a line item that likely does not appear in the Mint Mobile balance sheet — that is the actual cost of a Ryan Reynolds’ celebrity endorsement. If we look to industry comps having Ryan Reynolds as a celebrity spokesperson would cost Mint Mobile upward of $50M or 40%-50% of its annual revenue at the time of the acquisition. This cost factored in would drive the ARPU down the ~$25. These numbers make the T-Mobile acquisition seem crazy at best and irresponsible at worst.
But this is what is costs to get Ryan-Reynolds-as-a-service. And as crazy as the fundamentals are, this will end up working out for T-Mobile as a great acquisition. Here is why:
- Mobile subscriber acquisition is a zero-sum game new subscribers come from competitors not new markets
- Verizon, T-Mobile and AT&T are in a dog fight for subscriber growth
- Subscriber growth grows mobile network revenue, but offers significant ability to cross sell home internet products as a bundle
What is particularly attractive here is that the Mint Mobile subscribers are early adopters. They were those subscribers fall into a couple of buckets:
- Early adopters: Those that jumped on early to experiment with new/interesting provider
- Frustrated with major carriers: Those seeking a way out from AT&T, T-Mobile, Verizon
- Low-cost seekers: Subscribers who seek out the lowest possible costs
- Always-switching: A cohort of people who jump from provider to provider seeking the best service and promotional incentives
Through the lens of Mint Mobile’s 3 million subscribers these groups are small, but these cohorts exist outside of Mint Mobile — meaning there are low cost seekers that are T-Mobile or Verizon or AT&T subscribers. The market here is much larger — it is the entire mobile switcher market.
T-Mobile is on a tear over the past year taking share of market from its competitors and this is just more wind in their sail. The acquisition by T-Mobile virtually guarantees that “Mint-curious” customers of Verizon and AT&T will make a jump because they can now get Mint Mobile without the worry of network performance — a barrier when Mint was just Mint.
So as crazy as it seems, so long as Ryan Reynolds stays out of the TMZ headlines, we are likely to see the Ryan-Reynolds as a service is a value multiplier in three ways:
- Reduces advertising endorsement costs by $50M
- Draws disproportionate attention based on their fundamentals (See bonus Google Trends chart that shows US-based Search interest in Wrexham vs Goliath Ral Madrid)
- Maintains equity and Ryan-Reynolds assocation post acquisition
It is easy to think that Ryan is using his Hollywood looks and quick wit to charm top category players, but it he is putting in a masterclass in branding. The NYU leader in business valuation Aswath Damodaran taught is that a company’s value is driven by Narrative and Numbers. On the surface, Ryan seems to over index on narrative, but further exploration shows her can deliver the numbers.
Bonus Chart
¹ Initial data capture collected 556 headlines and they were deduplicated for purposes of analysis
² Data provided from variety of industry sources (T-Mobile 2022 Annual Report, industry reporting.