Cirque du Soleil – The Most Complex Creative & Corporate Reinvention in Business History?

“Are you submitting a bid for Cirque?” asked a journalist who knew about my previous interest in Just for Laughs. As a Montreal-based entrepreneur with a background in finance and decades’ of experience in media, I’ve received a handful to dozen of inquiries about Cirque du Soleil, which has seen its operations shut down as a result of the Covid pandemic. My assessment of the facts leads me to conclude that it represents – and requires – one if not the most complex creative, operational and financial recovery and transformations in corporate history. This is a report I had intended to share with those parties. As I am unsure of their or my interest to pursue the opportunity, I am publishing it here now as I have not yet entered into any non-disclosure agreement (NDA). By way of disclosure: I’ve reached out to the bankers managing the process but nothing in this overview consists of confidential information.

The challenges facing Cirque du Soleil touch on both finances and operations, creative and business. The airline industry faces a different obstacle, but it’s not frozen altogether. Other sectors have halted operations, but don’t face the same seemingly insurmountable obstacles to resume operations.

Hope is not a Strategy

When one even tries to envision what a “return to normalcy” entails, it becomes clear that without testing, vaccine, herd immunity or antibodies, there can be no return to normal. What we can expect, to balance health concerns (both physical and mental) with long-term economic spillover, is a progressive roll-out in waves and segments. Ultimately, when sports and media executives reach out to me to brainstorm about the operational and optical aspects of returning, I remind them: no one will feel bad about billionaire owners and millionaire athletes & artists when those who live paycheck to paycheck and incapable of paying for a one-time emergency expense are asked to make bigger sacrifices. Suddenly, they realize the mountainous road ahead of them.

Now, take the last industry that will return, add 6 – maybe 12 – months, that’s when Cirque’s show will open up, at best. After all, when you sit at the nexus of travel and live entertainment, rely on hotels and airplanes, you are the last in line even if you previously felt like you were at the center of the universe.

By my count, Cirque will have zero shows in 2020, and in a base case scenario will likely resume some time in late summer/post Labor Day in 2021. That’s a base case scenario. The best case is an early summer return somewhere fixed (like Vegas) and the worse case scenario is 2022 and beyond. Those who think this is fear mongering need to research the second and third deadlier waves of the 1918 Spanish Flu. Yes, we have better medicine, but we are more interconnected.

Hindsight is 2020

At the onset of 2020, Cirque’s business model can be represented by the following matrix (if you know me, you know everything can be represented by a matrix):

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There are clear advantages to licensing other existing intellectual property (IP) to build shows around. My company WatchMojo has built an entire media business around repurposing content from existing IP, so questioning Cirque’s decision to do so is hypocritical. But in our case, we rely on fair use (commercial use does not nullify fair use). No alt text provided for this image

Cirque relies on a mix of IP it creates and IP it licenses. As its business is the production of elaborate shows that are costly to run, the economic model requires jamming as many people in relatively confined spaces.

Given its business model selling tickets and the impractical nature of investing in shows only to conclude that it was infringing on the underlying rights, it cannot and does not want to rely on fair use when commercializing third-party IP. That’s logical. When licensing the rights to franchises like James Cameron’s Avatar, The Beatles, etc.), it spends years negotiating expensive packages which come with a heavy financial risk, an unknown return, and mainly, very limited scope to then commercialize and exploit thereafter (that last part is the key).

Being based in Montreal, Cirque’s marketing department doles out tickets to new shows to “friends and family, members of the media” as they finetune new shows, before they venture out around the world. I’ve seen a handful of shows this way.

The Avatar-inspired Toruk and Michael Jackson’s shows in Montreal were such examples and would sit in quadrant B.

I’ve also seen one residency in Las Vegas: The Beatles’ Love. That would fall under A.

The frequent knock (fairly or unfairly) with Cirque’s shows is, well, if you have seen one, you may have seen them all.

All of the examples of shows I name henceforth are for the purpose of making a bigger argument and do not represent my views on those shows, which are all dazzling and elaborate productions, where daring artists risk their lives. I’m naming shows randomly to illustrate business arguments.

While a show like Alegria May differ from Ka (both in-house IP), over time, they tend to blur.

Conversely, if you think of Disney, someone were to watch Lion King or Aladdin, let alone Star Wars or Toy Story, it’s clear that those franchises are different. Yet each and every time Cirque creates a new show, it undertakes massive risk for what is ultimately a questionable return with regards to differentiation and portfolio management.

Where the practice becomes costlier is that when you produce concepts from scratch like Ka or Alegria, unless you commit to expand the scope of that universe to move into toys, video games, movies, the upside is actually pretty limited and the value to that IP rather one-dimensional.

Unless the company has the people who can see beyond live entertainment, it’s culturally impossible to maximize the value of the IP.

In today’s media world (both before and after Covid), Cirque’s IP strategy is unsexy which is ironic given the lush appeal of its shows’ aesthetics. Hasbro bought Canada’s eOne for $4B for, arguably, Peppa Pig. Cirque’s path to reclaiming a $1 billion valuation is no fait accompli. To ever get back to its previous peaks will take a leap of imagination that the company had failed to demonstrate.

Cirque isn’t Alone, but it’s Different

To be clear: I’m not trying to be harsh here. If I’m summarizing countless conversations and preparing this overview, it’s that I care and want to see Cirque survive and once again thrive. As WatchMojo is the latest media & entertainment export out of Montreal, following in the footsteps of Just for Laughs and Cirque du Soleil, Cirque is one of the main influences on WatchMojo. When in 2015 Ernst & Young awarded me the Entrepreneur of the Year Award in Media & Entertainment in the Quebec region, I noted that Laliberté had won the same award a decade earlier (adding in self-deprecating fashion that he went all the way to win the 2007 global Entrepreneur of the Year). Indeed, when I tell others that I’m a business-minded creative or a creative businessperson, it’s an ode to Laliberté, the quintessential “storyteller/entrepreneur” I have modelled WatchMojo’s evolution into the next Liberty Media on in the decades to come.

Cirque’s Tale of the Tape

Cirque’s meteoric rise and sharp fall has been nothing but short of a Greek tragedy.

– $900M in debt.

– 15M tickets sold (per year)

– $1B in revenues pre-Covid. Revenues now: $0.

– WHO declares Covid a pandemic on March 12 2020

– Cirque lets go 95% of their staff, or over 4000 people, on March 19 2020.

– Ownership breakdown: TPG 55%, Fosun 25%, CDPQ 20%

– In May, raised $50M for salaries or debt payment?

No Single White Knight

Laliberté co-founded Cirque du Soleil in 1984. After buying out his co-founders, in 2008, he sold a stake to Dubai-based investors Istithmar World and Nakheel, launching residencies in 2012. By 2015, TPG/Fosun/La Caisse acquired 90% of the business. In February 2020, La Caisse acquired the remaining 10%, right before the wheels came off.

In an open letter in May 2020, Laliberté opened up:

“Cirque is a living organism – with a heart, a soul and a spirit – that lives, grows and recharges through its artists, its audience and its employees. (…) Even though I’m no longer the company’s owner, I will always be its founder. I have devoted half of my life to Cirque, and its success will always be close to my heart. We’re about to see a wrestling match involving a number of players. From my point of view, we’re in for a battle royale. “I am deciding whether or not I’m going to jump into that wrestling ring.” He warned of unnamed “sharks, who have no knowledge of the entertainment industry and dream of buying Cirque for a song,” as well as “those who have no skills or experience in managing cultural organizations of this scale. Those are the ones who pose the greatest threat to Cirque’s future.”

He’s largely right. While Laliberté is a talismanic figure, this isn’t about any one single person or party rescuing the organization. In the right hands, Cirque can come back stronger, but it will take a lot of time and only happen if it embraces change and rejects the status-quo as the end destination.

If you don’t think you have a problem, that’s a problem. Cirque’s problems pre-dated Covid. Covid just exposed them and made them near-fatal. To be fair, at the onset of the year, it was hard to imagine behemoths like Disney and LiveNation frozen with an unclear path to resuming operations. But whereas Disney and LiveNation can envision a return and a simple path to resuming operations, Cirque doesn’t have the same luxury. In fact, the day it let go of 95% of its workforce, you can argue it killed off its heart… and this a month after its soul – Laliberté – sold his final 10% in the business. Any honest insider will attest, however, that Laliberté had checked out years before, even launching a new venture Lune Rouge with a myriad of ambitious projects (disclosure: at least as of now, I remain a “CEO in residence” at Zu, a creative accelerator Laliberté is backing with via Lune Rouge).

Fighting for Its Life

As Cirque’s condition escalated from serious to critical, I began to speak to various people, and one comment stood out:

“Cirque has seen its share of challenges, inside and outside of Vegas. There’s a skeleton or carcass in Montreal. This is not a rehire situation.” 

If executives have a sadistic streak to get things done, entrepreneurs are masochists, idealistically and naively seeking out challenges. Had I not stumbled into entrepreneurship, I may have pursued a career in consulting or investment banking, working on such reports (without the personal anecdotes, naturally). Today I am an entrepreneur, investor, advisor. Cirque represents the mother of all corporate challenges, and I have studied many of them. My “thesis” paper while in college completing my finance degree was on Long Term Capital Management, whose dalliances with debt almost took down the entire economy in the late 1990s.

Fast forward twenty years, a pandemic has brought all of mankind to the precipice of disaster, but also, massive opportunity, which lures out investors who see, in Cirque, a wounded animal. But that begs the question: what are you buying? The brand? They don’t own the facilities. The shows are complex undertakings requiring people to set up, dismantle and operate. Those people – in the 4000+ and 95% of laid off employees – are not sitting at home waiting for a call. Eventually, the lower-paid crew will move on to other work. The managers – who will likely be the last to be brought back – will not hold out for long, either.

Indeed, this is not a simple re-hire situation. This calls for a total transformation, though I am unsure they realize that.

Whenever new money comes in – as it did with TPG’s majority investment – it comes with the assumption that it can do things better. As such, management had already seen a lot of turnover.

Chairman Mitch Garber said in an interview that the company went into investment mode, expecting a return in 2021:

“When the new investors bought the Cirque from founder Guy Laliberté in 2015 for a reported US$1.5 billion, the owners decided to go into expansion mode. The Cirque has spent around US$550 million since 2015 on new show creation, buying companies like the Blue Man Group, and on refreshing existing shows, like the ones in Las Vegas.”

Even the most optimistic of souls would concede that despite the firm being maybe more open to change, if the game plan is more of the same, it’s bound to fail. Cirque’s latest shows like Axel were greeted by poor reviews and ceased showings. Perhaps a character like Axel was in fact intended to spawn off future TV shows and movies, but Cirque has no track record in pulling that off. Cirque’s main investor, TPG, is also an investor in powerhouse CAA, but I’ve learned over time that an agent will not do the principal’s work, and an investor cannot force a portfolio company to operate in a given way, until maybe it has no choice. Hence why they seek preferred stock, which gives them the upper hand when push comes to shove.

Post-Covid, its lack of hits will be daunting since people will be more wary of sitting in a condensed close space with people from far-off places, so the course to success requires a re-think.

The Many Elephants in the Room

With big money comes a lot of egos. We all have egos, the question is can we contain them alongside others. Let’s be honest: if you are TPG/Fosun/Caisse and just bought out the last of the founder’s shares, a founder who via Lune Rouge is ultimately re-imagining the big broad space your investment operates in, how would you really feel about his return in to the fray, especially if it were to come at a discount?

How do you value Cirque?

If any investment is a discount on future value, and the future value is a reflection of future revenues, how do you calculate Cirque’s net present value?

One benchmark is the $1.5 billion the company was valued at. Another yardstick is the $900 million in debt it has on the books. Was the investors’ urgent $50 million injection been to help avoid triggering any covenants that would have wiped them out by missing an interest payment? The problem is always the debt. But therein also lies the opportunity, since debt trumps equity. If someone were to come along and dangle a carrot enticing enough for equity-holders to press the register, they may walk away with the asset. But with such a crowded backfield, most investors with the means to write such checks and remain patient figure they have more welcoming opportunities elsewhere with less unknowns surrounding it.

Investors give you an umbrella when it’s sunny and ask it back when they see a cloud. Cirque’s outlook is pitch dark now, and whether or not the sun rises again will boil down to an alchemy requiring operational expertise, financial acumen, creative flair and business marksmanship.

Risk v Return, Greed v Fear

Private equity underwrites a firm’s EBITDA; which Cirque didn’t have; it was losing money. Today, the situation is more dire. With zero in revenues for the next 6-24 months, it’s like a high-risk investment befitting venture capital firms, but few (if any) VCs will spend that kind of money on something with no technology, no IP (which can be monetized until a return of the live events) with no clear path to near-term revenues, and even less of a path to profitability.

As humans, we’re constantly walking the fine line between good and evil; as investors we walk the line between greed and fear. Cirque’s existing investors and debtholders may be in “fear” mode now, but once new investors come circling, they will switch to the naturally instinctive temptation of greed. It’s human nature.

The company may also be of interest to family offices who would view the investment as the high beta in their portfolio, but the problem is a family office lacks the strategic know-how and operational savvy to bring this back to life. Montreal royalty Stephen Bronfman’s Claridge could be one option, but he’s got his sights set on bringing back MLB’s Montreal Expos.

Ultimately, any financial party who’s contemplating an investment would want to know why TPG and La Caisse (who have the most to gain and lose) aren’t stepping up. One could turn to the Arabic world (given the demand for shows: Dubai has 3X the hotel rooms Vegas has, but yet greets 1/3 the guests vs Vegas), but considering a Dubai based investor first invested in the business, only to sell it to the current ownership group, what would it take for a previous, jilted investor to return to the table.

When it comes to assets under management, TPG has US$110 billion, La Caisse CDN$190 billion and Fosun US$80 billion. With a combined $500 billion in assets under management, logic suggests that the existing backers will just pony up, but not before seeing what concessions they can secure from the government.

Capitalism on the Way Up, Socialism on the Way Down?

Meanwhile, the economies in every corner of the world are looking at a “Great Depression”-like swoon. There is a helicopter-money like phenomenon going on, but eventually the game of musical chair will stop. The Quebec government, which looks at Cirque as one of its shiniest exports is indicating a willingness to help:

“Pierre Fitzgibbon told a legislative committee being conducted over the internet that a process is under way to consider options for the cash-strapped circus troupe and that various parties are involved, including the government. The government is in discussions with people who want to relaunch the Cirque du Soleil,” the minister said in response to questions about Quebec’s intentions. We will get involved to the extent that the private sector needs our support. … We’ll do it in the right way, but there’s no guarantee that we’ll be at the table when the game starts to be played.”

In Laliberté’s open letter, he alluded to a battle royale, where participants enter the ring at timed intervals and the last man (or woman) standing is victorious. That’s a fitting analogy for two reasons. The first one being that wrestling is of course somewhat rigged. I don’t see a likely scenario where anyone other than TPG and La Caisse walk away with concessions from the government (La Caisse is in fact the manager of Quebecers pensions). However, to avoid an investment loss or write-off, it helps to have the government add support above and beyond La Caisse’s existing investment.

But there’s something about Laliberté’s letter that piqued my interest. When describing the belligerents in the battle royale, he cites in the final two bullets:

  • “Standing right beside them are the sharks, who have no knowledge of the entertainment industry and dream of buying Cirque for a song. 
  • And at the very back of the ring are the others… Those who have no skills or experience in managing cultural organizations of this scale. Those are the ones who pose the greatest threat to Cirque’s future…”

Now I may be out of the loop, but that could certainly be seen as a snipe towards TPG, Cirque and Fosun, who while knowledgeable at arms’ length of the entertainment industry and cultural organizations would not be mistaken for actually for being more passionate about the arts than the return thereof. Of course, I could be reading too much into things.

Either way, it’s one thing for your average Quebecois to blindly support bolstering Cirque in normal times. These are not normal times.

Strategic Alternatives

So who are Cirque’s best strategic would-be partners?

These aren’t normal times, but not quite the end of days, either. Western nations are living a better version of what they’ve forced developing countries to live through for decades. But that’s another topic.

The most pertinent strategic buyers – Disney or LiveNation – are both reeling, too. Post Covid, the definition of risk and diversification has forever changed. Whereas previous corporations were conglomerates with operations in diverse sectors, companies have since the 1990s shed non-core assets and focused on their core competency. For Cirque, that meant more live entertainment, things like Blueman Group.

To quote a fellow media entrepreneur, Covid “has elements of the fear that we felt after 9/11, the financial worry that we experienced in 2008, and the unknown that surrounds a natural disaster like a hurricane or tornado all rolled into one;” ultimately it’s an acceleration of every trend. What was to materialize in the 2020s will happen in 2020.

It’s like Thanos snapped his fingers and half the economy was hit overnight in a near-fatal strike. Those companies will not come back anytime soon. While the other half was spared, they will be affected through ripple effects. Some will emerge stronger over time, some won’t. It’s like flying through turbulence.

Cirque, Disney, LiveNation et al. fare in the former. They are going through the five stages of grief, namely: denial, anger, depression, bargaining, and acceptance. They are each at various stages, but my guess is Cirque hasn’t yet accepted the reality that they will need to diversify, fast. This shock therapy to diversify and expand into areas that they may have overlooked, or resisted to look at in a business-as-usual mindset. That’s normal and what we refer to as Innovator’s Dilemma. We’re not in a business-as-usual time now.

Cirque needs to dramatically and decidedly expand and diversify into new forms of intellectual property, flip the licensing model on its head and better harness technology in a few key ways. For one, it needs to go direct-to-consumer (where would Disney be without Disney+)? It must also explore AR/VR in a way that is additive to the brand’s ethos. We all get it, you cannot simply take Cirque’s shows and watch them on a screen and expect clients to pay anything near what they pay to go watch it at a venue.

John F Kennedy incorrectly stated in a speech that:

“the Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger – but recognize the opportunity.”

but the point he was making remains valid. Covid gives firms a once-in-a-generation opportunity to do that in a complementary way that will not cannibalize anything. It’s normal for whatever remains of the board and management to be focused on what it will take to survive, instead of how to thrive.

Good Fit, Bad Timing

Of course, Disney is a natural fit and partner: it could take IP like Zumanity/Ka/Alegria and spin it out into TV shows and movies, amusement parks, cruises; in normal times. Having raised $11B in debt, its board would find it a tad reckless to shell out anything for something that, too, is frozen. Of course, with $500B in management, maybe TPG, Caisse and Fosun don’t need money, and given Disney having fallen 30% from its pre-Covid peak, may see the merits in trading Disney stock in exchange for Cirque, although if I am Disney’s board, I see a clearer path to profits in Disney than Cirque, and would not want to give up any of my discounted stock now.

LiveNation may decide to go double or nothing, but that also seems like a stretch. John Malone’s Liberty Media may swoop in. But Malone isn’t a softie and wouldn’t be investing for his affection of the product, but the business opportunity. Liberty Media would also not be the type who would invest in a business with no revenues.

Risk Factors: Spectres on the horizon

Competition

Once upon a time in Vegas, casinos had the monopoly. Cirque arrived at the right time when Vegas guests wanted more than slot machines. Before the pandemic, with sports around the corner in Sin City, Cirque was facing stiff competition for tourists’ discretionary dollars. With a pandemic now becoming our new reality, Cirque’s demand simply isn’t elastic enough.

Even in Vegas, prone to risk taking, it’ll likely be the last to recover, because sports can in theory resume with no fans, since it derives much revenue from the sale of TV rights. But with no fans buying tickets, there isn’t a Cirque business.

Aging Audience

There lies Cirque’s demographic challenge: Cirque’s average audience is “a 50-year old woman,” based on my previous conversations with Cirque employees. With a male-centric demographic and global reach of 150 million monthly viewers, WatchMojo had explored partnering with Cirque to reach a younger male demographic. It takes a long term commitment to move the audience onto a new fan base. And, when you have a business that generates $1 billion in annual revenues by selling “15 million tickets,” it’s hard to commit to building something new. That’s not quite innovator’s dilemma, but it is human nature.

Capacity & Seating

Post-Covid, older demographics would hesitate going out in public, let alone sit in an enclosed venue for 2 hours. Cirque desperately needed younger consumers, particularly men, but failed to pursue them in good times. It’s hard to do anything now.

But with a plethora of entertainment options, Cirque has little room to maneuver whenever it resumes operations. With a skeleton staff now, it can’t exactly pursue new ventures. This is why you push the envelope on sunny days, when you have umbrellas to spare.

Even younger audiences may balk at sitting in a venue next to others. When you’re in Vegas, the one-two combination of the Quebec takeover (Cirque and Celine Dion) is impressive. Cirque in particular is everywhere. With an exclusive deal with MGM, it has shows at Treasure Island, Bellagio, New York-New York, MGM Grand, the Mirage, Luxor, Asia Resort, Mandalay Bay Resort and Casino.

Arguably, there may be pent-up demand once shows resume. But having let go of 4,000+ employees, how easy is it to fire up the engines again? In the event audiences are jittery when shows resume and facing weaker demand, Cirque could have consolidated some Vegas

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shows but given physical distancing requirements, the many shows it has may provide a ray of light, letting it return with spread out seating. It’s hard to forecast how humans manage and overcome fear.

No Direct Access to Consumers

The direct-to-consumer (DTC) Advertising Video on Demand (AVOD) or Subscription Video on Demand (SVOD) revolution has redrawn the landscape and created a new world order (something I have covered extensively, more in this article or video). Were it not for Disney+, for example, Disney would find itself in an even more precarious position. Cirque is no Disney, which has leveraged its unparalleled library and superior IP to reach 50 million paid subscriptions within a year of launching, but even having 1-5 million subscribers who would have signed up to access Cirque’s 36-year vault, paying $1-3 per month or $5-10 per year (for example) would have given it a lifeline today when all events revenue dried up. But the content business is a different beast. A beast Cirque dismissed.

The battle royale analogy in Laliberté’s open letter is thus also pertinent because WWE was a pioneer in launching an SVOD and reinventing itself. A third parallel between the two firms is both being founded by mercurial founders, though WWE’s Vince McMahon remains at the helm, reclaiming the leadership after parting ways with former co-presidents George Barrios and Michelle Wilson in January 2020.

Physical Harm

There is, of course, a more sinister fourth parallel, between WWE and Cirque, which is both came with physical endangerment to performers. WWE has had its fair share of accidents in the ring and outside of it due to its inherent nature, as has Cirque, including the son of the group’s other co-founder, Gilles Ste-Croix, whom Laliberté bought out before Cirque’s value skyrocketed. When discussing the challenges of DTC offerings, a former Cirque employee confided: “part of the client experience is being on the edge of your seats, wondering if the performer will make the move. You don’t get that experience watching shows on screen.” The former employee has a point. Post-Covid, the risk factor regarding “physical harm” is extended to the proximity of performers on stage, behind the curtain, and so on, risking infections amongst the crew and artists. With a vaccine nowhere in sight, these are larger risks needing consideration.

Show Selection

I diplomatically suggested Cirque to expand into a new “IP Matrix” where they could continue to rely on licensed IP (i.e. Avatar for Toruk, Michael Jackson or The Beatles, etc.) but revisited how they developed new in-house productions. I’m not suggesting the specifics were better, but by relying – for example – on public domain concepts and figures, it would catapult the appeal of their new shows to a wider audience, especially if they catered to a male demographic. For example, I proposed to adapt my second book on the most influential secular figure in history, Alexander the Great, into a show that re-told his life story, even drawing parallels between their techniques and style and key themes and moments of his life (for more on that adaptation, here’s a video).

As we were exploring a marketing partnership, admittedly I used the concept of an Alexander-themed show to gauge their interest in the premise, but also as a blueprint for how we could promote Cirque shows around the globe, to 150 million viewers across our 30 international channels. Before the “cavalerie” (the show) rolls into town with “Alexander: The Show,” you send in an “aerial assault” (the marketing) which would be easier to build awareness for than say Ka or Zumanity; beautiful productions but abstract and harder to market. By building in demand before the first dollar in show development is spent, the ROI is bound to be higher.

Let’s set aside that concept, I didn’t actually expect them to go for it, but their reactions gave me tremendous insights into the position they now find themselves in. Such tough talk may sound undiplomatic, but in times of crisis, you don’t mince words, and as Laliberté himself sounded off in his open letter when getting around to the “sharks” encircling Cirque: the best stewards of the Cirque brand need to care as much about the creative as they do about the strategy, but without the right vision and strategy, no creative alone can save the day. Critics may point out that it was Laliberté himself who sold a majority stake to TPG, La Caisse and Focus, the reality is Cirque had grown into a cultural organization unique in size, stature, scope and price tag, meaning no one other than investment groups TPG, Fosun or La Caisse could underwrite such a check size. And of course, when institutional money enters an organization, the culture and communications change.

Culture

The company’s modus operandi and mindset didn’t permit it to consider, even if an Alexander the Great-themed live production would be on the bucket list for any bachelor party in Vegas (a surefire way how you go younger and skew male, before expanding into other industries including a hotel named Xander sitting next to… Caesars Palace). Ironically, I also pitched that live production Alexander the Great concept to Caesars Palace given competitor MGM’s exclusive deal with Cirque, which instantly saw the value and appeal.

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Either way, the upside was that by producing a show on a topic like that – in the public domain no less – would not cost them any licensing fee (they could have optioned my book if they wanted something to hang their hat on to, but didn’t even need to given the public domain nature of it), not required a complicated and drawn-out writing process, and allow them to more easily expand elsewhere.

At the time, we were discussing a marketing partnership. So I used the concept more as a way to illustrate how we could tie their shows to our videos. Fast forward to today, bias aside, WatchMojo’s innate strengths:

  • global reach,
  • promotional vehicle,
  • ability to carve out longer works into shorter, clip-sized montages with a narrative tying it all together, etc.

make it a natural partner as part of a broad coalition to map out a plan to restore Cirque but the only way Cirque has a future to be restored is if it lets go of its more narrow view of itself from the past and embrace a more global nature, in scope. That’s the only way Cirque can reclaim its value, let alone accrue it – and any smart investor or strategic partner would recognize that.

Undifferentiated IP

The other related by-product was to re-imagine how they developed IP: creating shows, launching merchandising, licensing the IP to theme parks. To me, it never made sense to develop random ideas in the dark with no value in other media. Again, what is (for example) Ka vs Zumanity? Could either be a movie? A series of toys? A ride at an amusement park? If yes, why has it not become any of those things? Go through its shows and tell me if you see any unique IP that transcends a live event? And, how are most of those shows fundamentally different from one another?

So the reverse, updated version of that Matrix creates more value: create a universe, then create movies, create toys, video games, etc. You become a smaller leaner version of Disney.

End Game?

In addition to discussing Cirque’s predicament with investors and media company executives, I am running these ideas by executives with experiences in these areas.

In doing so, to me, it’s clear that Cirque’s future is one of three things:

  • It can emerge as a smaller version of what it was, a brand under LiveNation/Disney that will be focused on abstract live entertainment. It can plot and plan for a return once authorities allow it to, and not have to rebuild the whole organization, leaning in on the parent’s infrastructure.
  • If it wants to stay big and return bigger, then it needs to hatch and launch a new, parallel business unit to generate revenues as the events business remains shut down. While it’s not early days in the DTC AVOD/SVOD game, there remains a window of opportunity.
  • It can simply never come back, at least not in any real iteration it had. In the wrong hands, Cirque will die – though its spirit will go on – and not because of Covid per se, and not because debt has always been the true killer of businesses, but because in periods of market dislocation and upheaval, some companies’ strengths turn into weaknesses, and opportunities into threats.

If you go back to Laliberté’s quote in his open letter: “Cirque is a living organism – with a heart, a soul and a spirit – that lives, grows and recharges through its artists, its audience and its employees.” But by letting go 95% of its employees a week after the WHO declared Covid a pandemic, it may have inadvertently dealt itself a mortal blow, because of the operational difficulty of resuming operations. In 6-18 months, those employees will either be dislocated from the economy, or have moved on. Cirque’s spirit will go on, but its heart and soul have left its body.

A Brand New World

Depending on its backers’ appetite, what they want Cirque’s future to be goes back to how they view the brand. Cirque has a powerful brand, its shows simply don’t.

If Cirque is the brand, then how it has approached its shows – for example Alegria, Saltimbanco, Ka, Zumanity, and so on – is peculiar at best. People care more about Game of Thrones than HBO when the show aired at its peak. But over time, HBO’s goodwill (brand equity) reigned supreme. If Cirque is the brand, its approach with the shows has been, for lack of better word, futile and wasteful. Just have a Cirque show in different cities and stop wasting resources iterating on what consumers cannot ultimately distinguish. No viewer will have a hard time differentiating The Lion King from Aladdin, let alone Marvel characters and Star Wars plotlines. Yet Cirque has spent billions trying to create something that frankly no one can really distinguish. It would make no sense to an investor or strategic buyer.

Cirque can be a production that plays in different cities, though to justify its multi-venue residencies in Vegas, it needs to offer Zumanity in New York-New York, Mystere at Treasure Island, O in the Bellagio and Ka at the MGM Grand. But none of those shows are IP in the sense that matter to investors or consumers who are looking for entertainment in Las Vegas, or for that matter, when a Cirque production rolls into their town.

Cirque needs a complete revamp of their worldview, let alone their modus operandi and mindset.

Where to go from here?

Given Cirque’s origins in Quebec, La Caisse’s existing investment, and Laliberté’s pride and roots, Cirque will not die, but it may not return to its former glory.

Quebec’s biggest media company, Quebecor, stepped in as a white-knight-in-waiting. Cirque Chairman Mitch Garber interjected:

“I think my personal feelings about Pierre Karl Péladeau are well known, and I shouldn’t let them enter into a process where I owe a fiduciary duty of governance to a board of directors that has shareholders and creditors.” 

Quebecor is the best example of a media company exerting maximum synergies within a local market. Its CEO Pierre-Karl Péladeau is seen as a feisty separatist, but compared to your typical NY or LA media or finance executive, that reputation says more about Quebec and Canadian culture’s aversion to brash and driven types. PKP is what I refer to as “prince entrepreneurs,” sons of empire-builders (his father Pierre Péladeau was a legend who built Quebecor, before his son PKP wrested control away from his brother, reinvented the company by buying cable powerhouse Videotron from the Chagnon clan and the rest, as they say, is history). The company had operations in France, and PKP expanded into English Canada but never matching his success in his backyard, he has contented himself with domination in la belle province. He flirted with politics and is a thorn in the side of his competitors, be it the Remillard brothers (other prince entrepreneurs) who inherited a fortune before diving into media, owners of GroupV before they sold it to Bell Media… or Bell Media itself, whose acquisition of GroupV Quebecor tried to thwart. It’s good entertainment, though nothing quite as legendary and epic as say Rupert Murdoch vs Sumner Redstone, etc.

It’s worth noting that when Quebecor had the chance to pick up Montreal’s Just for Laughs (JFL) festival, it hesitated to bid as aggressively as others, which gave an opening to LA-based talent agency ICM. Once ICM acquired it, it needed to find a local partner to retain the tax credits, and that is how we found ourselves in the mix, as the possible 51% or minority owner (here is my after-the-fact recap) before the Group CH (owners of the Montreal Canadiens and evenko) & my good friends at Bell Media elbowed us out. It’s all good, it’s business, that’s competition. That we were somehow in the mix was flattering, I sincerely believe ICM when they say they wanted us as partners (we have since gone on to be represented by ICM, and having the managing partner of one of the world’s biggest talent agencies as an advisor I can contact anytime is certainly ample for me). But there were a lot of egos and ultimately, I see it for what it was: WatchMojo was a useful pawn and prop for ICM to leverage with others.

Back to Quebecor’s interest Cirque, Garber added:

“To the extent that Québecor will be a fair player in any process that might come in the not-too-distant future, then I’m going to do my job and govern over that process and look at whatever anyone is going to offer, including Québecor. Of course, I won’t appreciate the process being fought in the newspapers, but we’ll cross that bridge when we come to it.”

Well that’s not quite true, but it’s typiquement Montréalais (another day, my friends). This report is not intended to be a Michael Jordan-style retirement speech, or Festivus-like airing of grievance rant. That Just for Laughs is also now paralyzed, didn’t seem to do a single thing we recommended they do, didn’t diversify into other areas and is now frozen due to Covid. It’s as if they didn’t learn anything. I don’t regret walking away empty-handed from that process, but it is frustrating. Cirque’s custodians have their work cut out for them.

My JFL experience and lesson was worth the price of admission: focus on what matters. Which echoes what every investor and corporate development executive I have spoken to recently about Cirque has told me: walk away, and focus on WatchMojo. To my own surprise, most seem more interested about exploring a future with us (though that has as much to do with Cirque’s crowded cap table). Ultimately, when one investor said “say you had an unlimited check, is Cirque the best use of that capital?”

As of now, my answer would be no, but the answer to that question boils down to your options.

From my vantage point as a Montreal-based entrepreneur, operator, investor, storyteller and producer, this is the Montreal paradox: a most cosmopolitan of cities, with the most regional of worldviews. To Laliberté’s credit, he was one of the few Quebec-based entrepreneurs who dreamed big and expanded on a global scale. As the insightful Quebec Inc. book chronicles, for many reasons, Quebec’s entrepreneurial aspirations tend to reach to its provincial borders, stop, and pull a 180. A city that at the turn of the 20th century rivaled New York in stature lost its rank as the country’s leading city to Toronto in the end of the-1970s. Laliberté deserves much credit for exporting Cirque globally, but Cirque’s global reach has made it vulnerable to a pandemic, what with it being global by nature.

What does the future hold? Grab a seat. Using Laliberté’s wrestling analogy one last time: I’ll be standing by ringside waiting to be tagged in, and like a good old-fashioned wrestling match, it remains to be seen whose side (if anyone’s) I end up on… and in the meantime, enjoying the show myself. There’s nothing like a good circus act.

If you represent a media & entertainment business that is trying to navigate Covid and found value in this analysis, please reach out to my advisory firm, Granicus Group, to see if we can help you come out stronger.

If this analysis is interesting and the kind of deep dive and breakdown that you enjoy researching and working on, feel free to reach out to me for employment opportunities as we are recruiting for Granicus Advisors’ formal launch in 2020.