Welcome to Issue #1 of the Manatt Digital Media (MDM) newsletter. Initially, we will publish these monthly—and look forward to receiving your feedback, since we want this to be a conversation and bring information and insights most useful to you. Frequently, as we do with this inaugural edition, we will organize these newsletters under one overarching topic—and our goal is to bring highlights of relevant key developments, together with innovative and unique thought leadership to make sense of it all. In this Issue #1, our theme is the white-hot topic of multi-channel networks (MCNs) and the multiplatform media world in general. Welcome! And, read on . . .
MCN 101—A Cheat Sheet for Key M&A, Strategic and VC Investments, Partnerships
The overall multiplatform video/media and MCN space continues to be white hot, with accelerating M&A, strategic and venture capital investments, and an ever-growing list of significant strategic partnerships. Tough to keep up with it all, but we at MDM follow the space very closely. To help, here is a scorecard/cheat sheet of key representative (1) M&A, (2) strategic investments, (3) VC investments, and (4) strategic partnerships—most recent first, so that you can get a sense of the accelerating pace, even during the recent purportedly slow-moving dog days of summer:
I. MCN M&A
Consider all other major vertically focused MCNs to be in play at this point, given all of the M&A activity.
II. MCN Strategic Investment
As opposed to M&A, this category represents major media companies that have taken significant equity stakes in (but not outright acquisition of) leading MCNs:
III. MCN Venture Capital Investment
As opposed to the strategic corporate investments discussed above, here are key multiplatform video/MCN-related venture capital investments:
- Blue-chip Silicon Valley-based VC Andreessen Horowitz invested $50 million to fund premium video development in BuzzFeed in early August 2014
- Russell Simmons' urban culture-focused All Def Digital raised $5 million from Greycroft, Advancit Capital, E.ventures, and Nu Horizons in early August 2014
- Germany-based MCN Mediakraft Networks raised $23 million from Iris Capital, Capnamic Ventures, and Shortcut Ventures in early July 2014
- Leading Latino-focused MiTu Networks raised $10 million from Upfront Ventures and existing investors in mid-June 2014
- Leading sports-focused MCN The Whistle raised $10 million ($18 million to date) from SeventySix Capital and name-brand longtime media execs Bob DuPuy, Garry Laybourne, and Bob Pittman in mid-May 2014
- Tastemade earlier raised $10 million from Raine Venture Partners, Redpoint Ventures, and Comcast Ventures in August 2013
- Fullscreen previously raised an undisclosed 8-figure sum from The Chernin Group, Comcast Ventures, and WPP in June 2013
- StyleHaul previously raised $17 million from Bertelsmann Digital Media Investments, RTL Group, and RezVen Partners
IV. MCN Strategic Partnerships
As opposed to outright M&A or investment, MCN growth also is fueled by strategic partnerships. Here are a representative few:
- The Whistle recently announced a major new distribution partnership with Xbox which included a major branded content component with Subaru (August 2014)
- Mitu Networks recently announced a major new content development and multiplatform distribution partnership with Spanish-language media giant Televisa (August 2014)
- FC Barcelona will use Dailymotion’s video player on their site, and Dailymotion will launch FC Barcelona channel, dedicated to soccer (announced early August 2014)
- Fox Sports Digital is partnering with Sporting News Media to share and swap libraries of editorial and video content (announced late July 2014)
- Conde Nast launches pioneering brand-focused The Scene with content partners including AOL, ABC News, Forbes, BuzzFeed, Vox Media (announced mid-July 2014)
- The Whistle announces continuous string of megacontent cocreation, codistribution and copromotion deals with the NFL, MLB, NASCAR, PGA Tour, AVP Beach Volleyball, Harlem Globetrotters (ongoing throughout 2014)
- Maybelline announced a deal with StyleHaul in June 2014 for branded content in its YouTube channels (with StyleHaul videos also appearing in Maybelline’s content hub and on TV)
- Leading media company Lionsgate and Freddie Wong’s RocketJump Studios agree to a multiyear film, TV and digital content alliance (announced April 2014)
- Mediakraft and British Pathe announce a major content deal in April 2014 to bring 85,000 videos to YouTube from their historical film archives—4/14
These certainly are key strategic MCN/multiplatform video “moves”—but certainly not all of them.
And, the action is still in its early innings …
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MCNs—Why They Matter (and What They Represent … the Fundamental Digital Media Transformation)
We follow and write a lot about the MCN digital video world. We do this because the rise of MCNs—and the massive M&A and investments in those companies—are key data points for the overall digital “movement.” Of the fundamental transformation of Hollywood. And, of the fundamental transformation of the overall media business. MCNs represent the new multiplatform media world that we had anticipated for years, but finally came into its own in a mainstream way just this past year.
It is here. It is now. Consumers get that. Especially Millennials.
But many traditional players in the overall media ecosystem (including many execs in major media companies and major brands) do not yet fully grasp this fundamental transformation which is transforming the underlying foundations of their businesses. MDM CEO Peter Csathy recently wrote about this after attending his first VidCon.
Core to this transformation is the mobile device—a device that is with most of us (even non-Millennials) virtually 24/7. Now high-quality video is available to consumers virtually anytime, anywhere—and we are voraciously eating it up. The bottom line is that different platforms are optimized for different forms of content. And the vast majority of video consumption on the small screen is of bite-sized short form video. That means that premium content development for that small screen is fundamentally different than it is for traditional longer-form video platforms like TV. That requires specialized expertise. Expertise that is not in the core DNA of most traditional media companies.
That’s where MCNs fit in. They don’t supplant traditional platforms. Rather, they expand them. They enable consumers to consume the full spectrum of entertaining, informative, and impactful video content. The mobile platform—that small screen—is finally ready for prime time. Scratch that. It isn’t just ready—it is here—it is now.
What else?
Our multiplatform media world—in which consumers demand these new forms of premium content (after all, they are “voting” by their sheer numbers)—also demands personalities who can speak most effectively to the massive young audience that has shifted much of its content consumption downstream. And that personality increasingly isn’t the mainstream celebrity. Rather, because these bite-sized videos ideal for mobile viewing are typically produced on very low (or, more usually, nonexistent) budgets, they are grassroots-driven (at least initially). And some of these grassroots videos and personalities take hold—for some reason—and rise to the top. Somehow some of them rise above the din. It is these YouTube personalities who are the new “celebrities” for Millennials.
A recently published study confirms that reality. YouTube celebrities are now more popular than mainstream celebrities to U.S. teens. Brands—take note! If you want to reach this key burgeoning demographic, then it is increasingly critical to commit significant marketing funds to the YouTube economy. To MCNs. To YouTube “celebrities.” To Viners. And, with these digital platforms, you have the added benefit of being able to reach and pinpoint the precise “right” audience for your messages. Then it is up to you to engage with them, effectively.
And that takes “authenticity”—a word that is foundational to this new world order. YouTube personalities rise—MCNs rise—and brands effectively rise—only with authentic voices.
Take some of the leading MCNs.
Csathy recently profiled #1 dance-focused MCN DanceOn and its founder/CEO Amanda Taylor. Why did she start DanceOn in the first place? Fundamentally, because of her love of dance. Because she already was helping professional dancers expand their opportunities because she was aware of their challenges. She felt their pain.
Csathy also recently profiled Larry Fitzgibbon, founder and CEO of #1 food-focused MCN Tastemade. Why did he start Tastemade after his successful IPO of Demand Media (which he also founded)? Because of his love of food. Of the beauty and creativity of food and cooking as an art form. And of the international bridging of cultures that food makes possible. That is authentic.
That same authenticity is pervasive by essentially all founders and CEOs in the MCN world, several of whom Csathy has come to know well (and some of whom we have the good fortune of closely working with).
Founder/CEO John West of #1 sports-focused MCN The Whistle? Absolutely—love of sports—believed that Millennials deserved their own new voice of sports. Roy Burstin, founder and CEO of Mitu Networks, the #1 Latino-focused MCN? Same story. Roy—from Colombia—“felt” a paucity of compelling video content for the Latino market (which he tells me has higher mobile consumption rates than other cultures). Stephanie Horbaczewski, founder/CEO of #1 fashion-focused MCN StyleHaul? Again, the same. You can feel it by the faux-furs she wears around her neck at events, even during the summer months.
And then there’s Allen DeBevoise, chairman of the #1 gamer-focused MCN. Allen is such an authentic believer in this new world order that he personally has invested in virtually all of these (and more).
THAT’S why MCNs matter. That’s why we follow them and the entire multiplatform media/video world so closely. And, that’s why we are excited about the massive opportunities in the media world that is now transforming in fundamental ways right before our eyes.
Let’s be clear. It’s not “out” with the old. But, it is absolutely about “in” with the new…
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MCN Company Spotlight—Tastemade—Peter Csathy’s Interview and Studio Tour with CEO Larry Fitzgibbon of the Leading Food MCN
Tastemade is a leading MCN that is focused on food, nothing but food. The company’s mission is to be “Connecting the World Through Food.” And investors have bitten—to the tune of $25 million in their latest round led—predictably (and smartly)—by Scripps Networks Interactive (owner, of course, of the Food Network). Megamedia companies Comcast (via Comcast Ventures) and Liberty Media also are investors in the company’s latest round (which is on top of $15 million previously invested).
Csathy recently visited Tastemade’s Santa Monica, California, headquarters and studios and met with CEO Larry Fitzgibbon. They had previously crossed paths a couple of times—when Fitzgibbon ran CitySearch and Csathy was CEO of SightSpeed, and while Fitzgibbon ran Demand Media and Csathy ran Sorenson Media. Demand Media is where Larry honed his chops for short-form video content. After Demand Media’s IPO in 2011, Larry and his other cofounders used their recipe of best practices and mixed in key ingredients of experience, learnings (e.g., focus on a passionate target audience/vertical market and build a brand), expertise, and passion for food to bake Tastemade. And, here we are.
Larry shrugs off the label “MCN,” choosing instead to call Tastemade a “modern” media company. Csathy mentioned to him that it was intriguing for him to use that word (“modern”), because that is a rarely used word in this day and age. His response to that was equally intriguing—i.e., “we are not a next-gen media company, because the audience has already migrated to digital platforms.” He is dead-on there. And, Tastemade’s content is developed natively for those digital platforms, unlike content produced for the Food Network or other traditional platforms like television (that is then frequently transitioned suboptimally to digital channels). Different strokes (content) for different folks (platforms).
And, here’s the interesting thing about Tastemade as opposed to many other major MCNs. Most major MCNs have thousands of channels. Not Tastemade. Tastemade counts about 300. And every single one of them—each one—is identified by pin, string, and individual profile on a massive world map on one main wall inside the company’s offices. Yes, old-world recognition by a new-world “modern” media company for the old-world art of cooking and food.
Here’s another one. Tastemade’s app (definitely worth checking out) enables anyone to be a “foodie” and instantaneously and easily make a beautiful professional video at their favorite restaurant while they order food and enjoy a meal. Everything is automated (editing, etc.)—and you can also select music tracks to accompany your “rave” (not reviews, because reviews can be negative) of your food experience so that others can enjoy. But here’s the punch line. Every single prolific Tastemade raver has his/her picture and profile on that same Tastemade office wall in an old-world format (via post-its this time), so that the Tastemade team sees their audience, their users, all day, every day. It is a great authentic reminder of what it is all about—to connect the world with food! Bravo to Larry and his team for those nice human touches.
Tastemade now gets 18 million unique visitors per month, and its core audience is, not surprisingly, 18-34 and about 60% female, with over 50% residing outside of the United States. This truly is an international play, because food travels well (at least digitally). The company’s business model is, as expected, primarily ad-driven (including significant branded content and sponsorship opportunities). But, the company—like many other MCNs (and virtually every media company)—is also experimenting with paid content (via subscriptions and/or micropayments for access) and ultimately with relevant commerce opportunities.
Tastemade is a company worth noting for its innovation and leadership in the multiplatform media/video world.
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Introducing O Labs—A Very Different Kind of Incubator (and JV of MDM, Leading Talent Agency ICM and Leading Development Company Originate)
Recently, MDM officially unveiled “O Labs”—a new joint venture by (1) Manatt/MDM (i.e., the entire firm), (2) leading talent agency ICM Partners, and (3) leading software development firm Originate—launched to create, nourish, grow, and operate innovative companies. Manatt contributes business consulting and legal services to portfolio companies; ICM contributes sales, marketing, and branding expertise; and Originate provides product and software development talent. And, all three will open doors for portfolio companies via their vast networks of contacts and relationships.
O Labs functions kind of like an “incubator,” but that moniker doesn’t tell the full story because its model breaks the mold. As far as we know, there is nothing else like it. No incubator brings such deep development resources and diversity of expertise, and services. MDM’s Hale Boggs, ICM’s Keyvan Peymani, and Originate’s Jeff Scheinrock make up O Labs’ investment committee.
All three companies are passionate about innovation—and ICM and Originate are absolutely at the top of their respective games. So, together, each partner has decided to put its money where its mouth is—directly into the most innovative companies (and the entrepreneurs who created them). O Labs has already funded and is growing its first company—Versus—a platform for legal, real-money video game tournaments—on the bleeding edge of innovation.
O Labs adds another important strategic and differentiating element to MDM—a 5-part value proposition: (1) business consulting; (2) legal; (3) venture capital; (4) deep industry contacts and relationships; and now (5) company creator and operator.
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