What Does A24's $3.5 Billion Valuation Mean For Hollywood?

Do you remember the first time you heard of A24? I remember my old roommate getting a flowery baseball cap from the studio when they released Midsommar, and that's when I knew it was going to be huge.

It had merch.

It was an indie studio that had tapped into these hipster sensibilities of being COOL. And it was attracting filmmakers who wanted to work with them because of it, and making unique and daring movies.

After it crushed the Academy Awards with Everything Everywhere All at Once, I felt like everyone knew about the studio.

It has been quietly building its catalog with outside-the-box ideas and breaking in filmmakers who become household names.

Now, a recent evaluation has A24's worth listed at $3.5 billion, which is staggering for a mini studio that feels like it broke on the scene just a decade ago.

How did this all happen, and what does it mean for Hollywood? There's a cool breakdown in the Observer we're going to go over.

Let's dive in.

How A24 Became a Household Name

Independent film studio A24 has carved out a unique space in Hollywood since its arrival in 2013. In just over 12 years, it went from an indie house to being able to fund blockbusters.

A24 cultivated a devoted following and a brand synonymous with quality and artistic vision. It's crazy to think they just focused on making good movies, and it worked out.

I liken this to Pixar, which just made great movies for so long that people saw everything they did. A24 did the same and focused on being able to make those movies for a price.

It kept doing that, and while not every movie was a hit, enough of them were, and the company grew. And it kept growing.

Now, the studio's valuation is $3.5 billion, which is a huge amount of growth in just over ten years. It's now a model for how others can follow in its footsteps.

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But Can A24 Scale Up Without Selling Out?

When you get an evaluation like that, it can help with getting bank loans and other things needed to make bigger and bigger movies. But with those big price tags comes a lot of risk. A24 is known for its indie sensibilities and even making mid-budget movies that break out.

The studio's playbook has revolved around low-to-mid-budget productions, typically in the $15 million to $20 million range, coupled with savvy, cost-effective marketing. This approach has minimized financial risk but also capped blockbuster-level returns.

Now, with a hefty valuation to justify, A24 appears to be venturing into bigger-budget, broader-appeal territory.

When you start cutting checks north of $100 million, usually you need a wider audience, not a niche.

Despite its significant cultural footprint, A24's box office numbers have traditionally been modest, never exceeding 2.45% of the annual U.S. market share.

Is the studio ready to dive headfirst into these larger, uncharted waters of competing with the Disney, Warner, and Universal-sized studios?

And can it maintain its voice doing it?

The first test seemed to be Alex Garland's Civil War, which came with a hefty price tag of around $50 million, maybe more when you factor in P&A. Well, A24 was able to pilot that to $127,337,886 worldwide.

Can it continue to do that on a larger scale?

I think the opportunity is there if it continues to also make sure the larger spends are done with commercial ideas. Take a look at the box office of SinnersSinners. It's cool that WB sided with that movie, but I could see a place like A24 making a splash with titles like that in the near future.

Upcoming titles, Highest 2 Lowest, The Smashing Machine, and Friendship, look to continue that trend.

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A24 Makes a Lot of Money in TV, Too

While it's famous for movies, A24 has an incredibly successful TV branch. Hit shows like HBO's Euphoria and Netflix's Beef are expanding its library and revenue streams.

It has a footprint on both streamers and cable. And while the rest of Hollywood looks to expand into network TV, it certainly could try its hand at that, with anything on the table.

In an era of evolving viewing habits, a strong TV presence is crucial.

Successful episodic content not only generates service fees but also opens doors for lucrative intellectual property rights, including derivative works and merchandise, when A24 owns the IP.

If it expands into movies, look for it to also explore other avenues in TV. After all, you can take as many risks as you want as long as the cash rolls in. And A24 has cash coming in from multiple fronts.

Will A24 Just Sell To a Bigger Fish?

When you get a valuation that's over a billion, people start to take notice. And it also means the big fish are looking to purchase rather than compete. Places like Amazon and Apple have a ton of cash on hand, and would love to sculpt out an entire library of mostly movies that are well-reviewed.

And also that covers a paying niche that may want to subscribe.

While A24 may be ready to make movies with these big places, it may not want to. The people behind it may hear valuations like that and want to sell.

That, plus the private equity firms who are key investors in A24, may lead the founders to sell this off and start again while they're so valuable.

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What Can Hollywood Learn From A24?

If I were a producer with a little bit of money to make some movies, I would be closely watching how this A24 situation plays out. The game plan of making good, small movies that have commercial hooks is something I think this town can replicate.

And something that looks like it could make me a lot of money in the long run.

You have to think that a lot of these smaller indie producers are looking at this situation with inspiration.

Hopefully, this leads to them making more movies and TV shows, trying to replicate this business model.

But don't try to do it too fast. A24 also has a huge podcast, merch line, and is diversifying in many different ways, to make sure the revenue streams stay open.

Summing It All Up

A24's attempt to blend its signature storytelling with more commercially ambitious projects is a fascinating development with potential ripple effects across the film industry.

Whether the indie darling can successfully transition into a major player while retaining its unique voice and artistic integrity remains a fun story to watch.

Let me know what you think in the comments.