I recently decided to invest in Elvis Presley; EPE (Elvis Presley Enterprises), actually. I did that by purchasing 200 shares in CKX, Inc., a parent company owned by Broadway media mogul and producer Robert Sillerman, who acquired controlling interest in EPE in 2004. I decided to buy CKX stock for three reasons. First, an Associated Press financial article that appeared in my local newspaper on January 9, 2010, the day after Elvis’s 75th birthday, predicted that CKX “could double or triple its stock price over the next couple of years.” Second, the price was right. CKX peaked at nearly $28 a share in 2005; it was at $5 per share when I bought in. Finally, it was a sentimental choice. I’m an Elvis fan. He’s already demonstrated his commercial power as a dead celebrity. I have faith in his future earnings potential.
Of course, a smart investor always examines the history of a company before investing in it. In CKX’s case, that history goes back only five years. Most long time Elvis fans were shocked when they learned in December 2004 that Lisa Marie Presley had sold 85% interest in her father’s estate to Sillerman. We had gotten used to EPE being under family control. The Presley estate was on the verge of collapse after Elvis died in 1977. Priscilla wrestled control away from Colonel Parker, opened Graceland to the public, and rebuilt the commercial value of Elvis’s name. Ownership of Graceland and EPE eventually passed to Lisa Marie, as the heir to her father’s estate.
Lisa Marie was 37 in 2004 when she sold her father’s image to Sillerman. The terms of the deal were as follows. For $100 million, Lisa Marie gave up 85% ownership of EPE. On December 17, 2004, The Commercial Appeal in Memphis reported that Lisa Marie retained “Graceland and its 13.6-acre grounds, including her father’s grave site and the vast archives from jumpsuits and jewelry to contracts and furnishings that help make the estate second only to the White House as the most visited celebrity home in the country.” She also received roughly $50 million in cash, $22 million in stock, $25 million to cover operating debts of EPE, and 15% ownership in CKX, the new parent company created by Sillerman. (CKX stands for “content is king.”)
• Sillerman more a businessman than an Elvis fan
It was certainly a sweet financial deal for Lisa Marie, but fans were worried about how Elvis’s image would fair in the hands of a money-first wheeler-dealer like Sillerman. When he bought EPE in 2004, Sillerman tried to soothe Elvis fans by claiming he was one of them. “My favorite Elvis song is ‘Can’t Help Falling in Love,” he pronounced, “my favorite movie is ‘Viva Las Vegas,’ and I dressed up as Elvis in 2003 at Halloween.” Fans were also pleased that the EPE management team was left in place. Jack Soden, who retained his position as EPE’s chief executive officer, promised fans there would be no drastic changes. “Hopefully what they’ll notice is that we keep getting better and better,” he explained.
For her part, Lisa Marie tried to diffuse fan disappointment with the following prepared statement:
“My greatest responsibility to my father is to preserve and protect his legacy, and this is an exciting new structure that opens up an incredible array of opportunities with a major infusion of new investment capital to do just that. It’s the ideal partnership in that I retain Graceland and my father’s personal effects, yet joining forces with Bob Sillerman will give us the opportunity to grow even further the intellectual and entertainment properties.” In effect, Lisa Marie was admitting that she had neither the resources nor the business acumen to take EPE to a higher level.
• Fans were willing to give Sillerman a chance
At first fans felt blindsided by the transition but seemed willing to give Lisa Marie and Sillerman the benefit of the doubt. Audrey McKee, a Denver Elvis fan club coordinator, voiced the general feeling of Elvis fans when she told The Commercial Appeal, “I certainly don’t want to see Graceland closed, and they’re assuring us it won’t. If any changes are things we aren’t going to actually see it probably doesn’t really make much difference.”
Five years later, however, we’re starting to see what Sillerman had in mind for EPE. He may be a closet Elvis fan, but business is business, and Sillerman is not about to change is modus operandi. The AP article earlier this month described Sillerman’s reputation as follows:
“Analysts say management wants to fatten up the company (CKX), and then sell it for big profits—possibly within the next five years. That would be in keeping with the pattern established by CKX’s founder, Robert F.X. Sillerman. Sillerman made a name by collecting radio stations and concert promotion companies on the cheap and selling them to media giants like Viacom and Clear Channel for big profits. A buy-and-hold guy, he’s not.”
So what has Sillerman done in the last five years to build up CKX? Well, he’s added a couple of other entertainment entities to join EPE. He acquired the British company that produces “American Idol,” and he bought the rights to the name and likeness of boxing legend Muhammad Ali. Still, since CKX peaked in 2005, its stock has dropped over 83% in value. Morningstar, the online stock research site, rates CKX among the worst performers in the Bear-Market of recent years. Also, Morningstar gives the company a current grade of “F” in profitability. Hence, the low share price.
• The search is still on to expand Elvis’s appeal
But has Sillerman done anything to build up the EPE side of CKX? Not much, it turns out. Elvis licensed merchandise has increased some, and the King’s music continues to be repackaged and reissued over and over again. Those efforts, however, mostly appeal to Presley’s traditional fan base, and it is difficult to imagine what more Sillerman can do for that aging demographic, unless he can find some way to keep us from dying off one by one.
CKX’s real challenge is to somehow expand Elvis’s appeal to a new and wider audience. It needs a project to send waves of Elvis interest through 21st century culture. An attempt to do so was made several years ago with “All Shook Up,” a musical in the pattern of “Mamma Mia” and “Jersey Boys,” which had sparked renewed interest in ABBA and the Four Seasons, respectively. “All Shook Up” bombed on Broadway, however, and so CKX is looking elsewhere to build up Presley’s appeal. The recent AP article details the company’s current efforts.
“Some upcoming projects could also increase the company’s revenue. CKX wants to redevelop Presley’s Graceland estate and the popular Heartbreak Hotel to boost their appeal to a wider variety of tourists beyond the aging core of Elvis devotees. They’re also partnering with Cirque du Soleil to offer an Elvis-themed show in Las Vegas that will debut in April.”
• Presley legacy will never decline in value
I don’t know what Sillerman has in mind to “redevelop” Graceland, unless it’s the project that’s already been announced—the building of a visitor’s center adjacent to Graceland to replace the strip mall across the highway. As for the Las Vegas musical concept, CKX is late to the table with that project, as it was with the Broadway show. The Beatles Cirque du Soleil show in Vegas has drawn huge crowds, and Sillerman’s company is obviously hoping it will work for Elvis too. As both a shareholder in the company and an Elvis fan, I’ve got my fingers crossed.
I figure there are two ways my financial investment in Elvis can pay off. First, the Vegas show succeeds and creates a new cultural interest in Elvis. Result—up goes CKX’s stock value. Second, my stock splits when Sillerman sells Elvis and CKX to a conglomerate, as he most certainly will do within five years. If the Cirque de Soleil project flops, and Elvis’s audience continues to slip along with CKX’s profits, I may eventually find myself claiming a capital gains loss on my income tax return. Even if that happens, though, I’ll still be an Elvis fan. His music will always be the most important asset in the portfolio that is his legacy. And that will never drop in value, as far as I’m concerned. |Alan Hanson (January 2010)
"My greatest responsibility to my father is to preserve and protect his legacy, and this is an exciting new structure that opens up an incredible array of opportunities."