By Peter Csathy
Back in January, VideoInk posted my 5 Predictions for Digital Video in 2015. In the little more than six months since then, there have been significant developments and disruptions in the digital media eco-system, capped off by last week’s announcement that German media giant ProSiebenSat.1 Group was merging its multi-channel network Studio71 with L.A.-based Collective Digital Studio (CDS) to the form new global MCN Collective Studio71.
Given this and other recent changes — from Facebook’s recent video advertising moves to Maker Studios’ acquisition of social media agency Instafluence — I thought it was a good time to take a look back to see how my prognostications measure up to today’s realities.
Below are my original 5 Predictions, juxtaposed with where we stand now.
Prediction #1: The pace of MCN acquisitions will accelerate as more studios jump into the M&A game rather than try to figure out this new content platform themselves. Some leading MCNs ripe for acquisition include Tastemade, DanceOn, MiTu, Whistle Sports and Collective Digital Studio. (Note: Manatt Venture Fund is an investor in DanceOn and Whistle Sports is a client.)
The reality: Prior to last week’s ProSieben/CDS deal, the pace of MCN-related M&A seemed to have slowed, replaced by an accelerated pace of more cautious strategic investment as media companies, too afraid to go “all in,” struggle to develop their digital-first video strategies. But that changed with the CDS deal — one of the 5 MCNs I had predicted was ripe for M&A — which values the combined Collective/Studio71 MCN at $240 million after ProSieben’s additional $83 million new investment. I believe this deal will, essentially, kick off a new second wave of MCN M&A in the next year.
Overall, I think it’s safe to conclude that the YouTube economy has “grown up” significantly in the past 6 months — so much so that it has outgrown YouTube. Now, for the first time, multiple powerful “off-YouTube” platforms exist, most notably Facebook, about which I just blogged a detailed analysis, and Snapchat, which launched its highly-strategic Discover video feature in January and later coyly announced its plans for global advertising domination. That’s why most have shed the MCN moniker (which most never really liked anyway) in favor of acronyms like MPN (for “multi-platform network”). And, in another trend worth watching, major media companies began to incubate their own MCN-like sites (e.g., Discovery Communications’ women-focused TLCme).
Prediction #2: The MCN action won’t be just domestic. International becomes a major new battleground in the borderless digital video world. Companies big and small will extend their reach via major partnerships, investment and M&A. Notable 2014 deals included RTL’s acquisition of StyleHaul, Sky’s $7 million strategic investment in Whistle Sports, and Fullscreen’s partnership with major Indian MCN Qyuki.
The reality: The international battleground is even bigger and more intense than anticipated. The ProSieben/Collective Digital Studio deal underscores that point with an exclamation mark. Other key moves include Netflix’s expansion into China, Italy and Portugal, Vivendi’s acquisition of DailyMotion and potential “Netflix killers” cropping up in Canada (Shomi) and China (TBO).
Prediction #3: Major consumer brands follow suit. For the first time, marketing dollars shift in significant scale from traditional media to more measurable digital platforms. This takes the form of branded content — not just ads. As a result, investors place major bets on ad-tech companies to maximize and measure those spends. We will see a number of significant ad-tech exits, like Yahoo’s recent acquisition of BrightRoll for $640 million. Several brands will go even further and invest big to become digital-first lifestyle media companies a’la Red Bull, developing and aggregating content. GoPro, Pepsi, and Marriott have already announced such ambitions.
The reality: Activity by brands has accelerated, as they begin to fully internalize the digital-focused transformation — and opportunities — of the media and entertainment business. While there were fewer examples of new Red Bull “wannabes” in the first half of this year, there has certainly been a proliferation of branded content studios, including new shops opened by Conde Nast, CNN, iHeartMedia and Fullscreen. Additionally, the reality (and accelerating pace) of advertising dollars shifting from traditional platforms to digital sunk in to both marketers and media executives. If nothing else, the recent NewFronts served as a loud and shrill wake-up call for those still sleeping. MCNs also are increasingly cutting out the middleman and
playing the role of ad/creative agencies in the digital video eco-system.
Prediction #4: Both “traditional” media and YouTube itself are increasingly challenged by this fast-accelerating activity and by new competing video platforms like Facebook and Vessel. These “off-YouTube” platforms will seek to lure content creators with tales of more attention and significantly greater revenues.
The reality: “Off-YouTube” is a mantra chanted increasingly — and with increasing volume — across the globe now. The threat to YouTube’s über-dominance is real. Vessel started the year off with a bang, but that bang now feels more like a whimper when compared with Facebook’s massive growth (and strategic prioritization) of video, together with Snapchat’s accelerating video focus (including its strategically significant Discover feature). Facebook, in particular, has become even more strategically important to (and in the direct line of sight of) video creators and distributors than anticipated.
Prediction #5: Seeing all this activity, and harboring a FOMO mentality, Silicon Valley investors will increasingly make pilgrimages down to L.A., the epicenter of video content innovation and creativity. After all, even super blue-chip VC Andreessen Horowitz vouched for video with its $50 million investment BuzzFeed. That accelerated pace of investment will only further fan the flames of the vibrant SoCal entrepreneurial scene and the digital-first video revolution.
The reality: Few doubt this one. Los Angeles is a serious new VC battleground. My colleague Hale Boggs, chairman of Manatt Digital Media and the Manatt Venture Fund (which actively invests in digital media companies, including MCN DanceOn), confirmed this trend. “Many principals from major (Northern California) VCs are spending more time visiting with companies here, and a lot of the larger funding rounds for LA companies are now being led by those VCs,” Bogg said. Some, like respected digital-focused San Francisco-based Rothenberg Ventures (which recently launched the first virtual reality accelerator, River), have opened new offices in L.A.
Peter Csathy is CEO of business accelerator and development firm Manatt Digital Media, where he also serves as a venture capitalist. He regularly posts industry analysis on his Digital Media Update blog and contributes to VideoInk and other leading digital media and technology publications.