Kate Bulkley, Media Analyst.

Catching the Rightster wave

By Kate Bulkley

Broadcast News

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For Broadcast September 05, 2013

The MCN’s IPO is a fascinating development, says Kate Bulkley

The announcement of an IPO this autumn by Rightster, one of the new-style web video content distributors and marketers, has caused only a ripple in the world of UK television, but I think it’s one of the most interesting stories in recent months.

Rightster is a multichannel network (MCN), one of those middle-man-type companies bridging the gap between YouTube and content creators, while at the same time understanding how to make the first tranches of significant money in this fast-growing space.

Among its partners is Viral Spiral, which advises online stars behind some of the most popular clips on YouTube, including the viral hit Charlie Bit My Finger (pictured).

For large producers, talent agents, broadcasters and pay-TV companies, MCNs are increasingly fascinating. Venture capitalists have already pumped millions into Base 79, Fullscreen, Machinima and Maker Studios, while in May this year Dreamworks Animation bought Awesomeness TV in a deal that could be worth $117m to its founders.

Rightster, however, is the first to try its luck on the stock market and hopes to raise £15m on the alternative AIM market to value the company at £50m. With so much chatter about YouTube’s future, a company such as Rightster is catching the wave of TV’s developing world and the reaction of investors will show how this section of the industry is viewed.

Rightster already has some solid clients in the form of ITN, The Guardian and Aussie-rules league the AFL.

A cash injection, they say, will attract more top-notch clientele. It plans to continue to monetise existing content but it also wants to be a co-producer, which will help it move up the content food chain. Conversations with talent agencies such as James Grant, ad agencies like Group M and producers like Fremantle Media are already said to be happening.

This sounds similar to Machinima’s strategy of signing deals with established talent but anyone will tell you that producing web video is a treacherous, low-margin business, even as it is attracting big players such as Microsoft, Amazon and Netflix.

Rightster knows the power of YouTube is its aggregation prowess, as this is where people go to find online video, but when it comes to monetising those videos, big hurdles remain.

YouTube typically gets 40-45% of revenues and this, combined with CPMs (cost per impression), makes finding more lucrative avenues key. Rightster believes the way forward is in subscription apps, creating own branded web spaces, and selling to pay-TV operators, as well as syndicating clips to other sites.

Informa predicts that online video will be worth $37bn by 2017 and Rightster is betting that the market will appreciate the opportunity. Certainly the other MCNs will take great heart in their own future if Rightster’s IPO works.

Rightster operates 10 offices globally and says it has enjoyed three “encouraging quarters”, but that doesn’t yet convert into profits. Chief executive Charlie Muirhead won’t be drawn on when the MCN might make money, but he says he will use the money to build the “second generation technology platform”.

Like Amazon, Muirhead wants Rightster to major on its technology platform and scale to stay ahead of the game.

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