Kate Bulkley, Media Analyst.

Buyout fever strikes online

By Kate Bulkley

Broadcast News

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For Broadcast July 17, 2014

MCNs are hot property, but market is fragmenting, says Kate Bulkley

As we recover from the illness known as World Cup Fever, the importance of all things digital has been emphasised once again. Lots of us watched at home or in the pub, but a staggering number were glued to their mobile devices. On 8 July, Germany v Brazil became the most-tweeted- about sporting event ever with 35.6 million tweets, while the final attracted 32.1 million.

Digital activity is underlined by World Cup viewing activity but by no means limited to it. So it’s unsurprising that Rightster bought rival multi-channel network (MCN) Base79 last week. But the figures left many people (including me) wide-eyed: £50m for a company valued at £37.5m only eight months ago.

Ashley MacKenzie’s Base79 has been Europe’s MCN frontrunner, raising £7.5m two years ago from ex-Fox supremo Peter Chernin’s investment arm and managing online content for the likes of Endemol and Syco. Rightster is in the same sort of game and buying Base79 adds scale to its publicly listed business. The two rivals were beginning to tread on each other’s toes.

MCNs are hot property. Germany’s Mediakraft raised E16.5m (£13m) last week in new European venture capital and the big boys have caught MCN buyout fever: Disney paid $950m (£550m) for Maker Studios (home of PewDiePie); DreamWorks has snapped up kid-focused AwesomenessTV; Warner Bros has invested in video-gaming MCN Machinima; Red Arrow Entertainment Group parent ProSeibenSat1 has a 20% stake in Collective Digital Studio; and Fremantle Media parent RTL Group controls 51% of Germany’s BroadbandTV.

But the marketplace is starting to fragment. Rightster chief executive Charlie Muirhead thinks it’s about scaling up to make the online economics work (he’s not wrong, particularly if you want to deal with YouTube). Others are focusing on nurturing YouTubers and other original-content creators.

Shine Group bought ChannelFlip, which runs an MCN but mostly works with TV and YouTube talent and brands; All3Media spin-off Little Dot Studios focuses on original content, with a view to some of it ending up back on TV; while Diagonal View (part-owned by ITN) finds all kinds of ways to jump on the zeitgeist – its content includes Jack Harries of JacksGap (son of Left Bank’s Andy Harries) interviewing Ed Sheeran live on YouTube (pictured) and audience-grabbing fare like ‘Top Ten Most Shocking Moments in World Cup History’ videos. The latter content is cheap and gets lots of views – it’s the Buzzfeed-lists approach.

The problem is that as media brands and talent get more experienced in how to navigate online, they can either do the job themselves (Endemol pulled channel management of Mr Bean back from Base79 earlier this year) and/or get more demanding (read: expensive). The minimum guarantees some of these MCNs are throwing about are outpacing the potential ad revenues.

Nurturing new talent and owning content is a slower, riskier burn, but can build a more sustainable business. No wonder Rightster has bought up the rest of Viral Spiral, the online talent agency that represents the Charlie Bit My Finger YouTube child stars. As in TV, creative talent is the key to making it online as well.

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