For The Guardian November 24, 2013

You may never have heard of Rightster but you have more than likely watched videos it syndicates on YouTube, newspaper websites and specialist live streaming sites like one for the recent Mercedes-Benz Fashion Week.

One of a new breed of companies – collectively known as multichannel networks, or MCNs – mining the commercial opportunities provided by the fast-growing online video market, Rightster floated on London's AIM stock market earlier this month and is planning a growth spurt of its own. The AIM listing raised £20m, with the loss-making, three-year-old startup now valued at about £73m.

Unlike some MCNs, rather than being a producer in its own right Rightster is in the distribution and syndication business, matching content creators with online publishers looking to get more video on their websites. Clients and partners range from traditional media organisations including ITN, the Guardian and the New York Times to content owners such as the Australian Football League and the British Fashion Council. "We are not a media company but a supplier to media companies," says Charlie Muirhead, chief executive and co-founder of the London-based company.

The global market in online video is expected to grow by 26% this year alone to £9bn (including advertising, subscriptions and transactions), according to a forecast from Informa. This growth trajectory is expected to continue, driven by the uptake in smartphones, tablets and connected TVs, with the sector anticipated to be worth £24bn globally by 2017.

Within this rapidly expanding digital media market, MCNs are akin to Discovery or Dave and Gold owner UKTV. But instead of operating TV channels on Sky or Virgin Media's platforms, they run online video channels, usually via YouTube.

Muirhead considers YouTube, the dominant online video platform with more than 4bn hours of content watched on the site every month, a key distribution partner, but says it accounts for less than half of Rightster's revenues. YouTube's scale means that it is key to online video distribution but because the Google-owned site exacts 45% of any revenue generated, it is in content creators' interests to syndicate elsewhere as well.

"Rights-holders have a lot of interest in YouTube but also in directing traffic beyond YouTube and on to their own sites and other publisher sites," says Muirhead. "We outsource the challenge of getting video on to a number of sites and help them monetise that content more efficiently."

Three years ago, Muirhead, a serial entrepreneur in the tech sector, saw an opportunity to jump on the growth in online video and provide a service with the shorthand: "upload once, commercialise everywhere". Muirhead and Rightster co-founder Tabitha Goldstaub began the business with fashion, striking a deal with the British Fashion Council to live-stream London Fashion Week on BFC's own site and also to syndicate the video clips to more than 200 publishers in 130 countries.

Today the company's online syndication network has 6,500 publisher sites and 750 content owners. In the first half of 2013, Rightster had 160m average monthly views of videos it distributes, a 30% growth from the last six months of 2012.

The £20m Rightster raised with its AIM listing will fund further expansion of its global network of sales offices, take its technology platform to the next level and help fund potential acquisitions to add scale to the business.

Growing fast is key and that costs money. Rightster has a high cash-burn rate, losing £8.5m in the six months to 30 June 2013, on revenues of £3.5m. Its staff of 200, including a 60-strong technology development team in India and others split among 11 sales offices in nine countries, is likely to grow. Muirhead is also eyeing more acquisitions on top of the recent €2.1m purchase of European film trailer distributor Preview Networks and the £300,000 purchase of Sports Syndicator, a display advertising sales agency.

Rightster owns a stake in Viral Spiral, the UK company that represents the 2007 viral video hit Charlie Bit My Finger and has developed an expertise in matching online content with brands. Viral Spiral recently formed a venture to bring online talent and brands together on Vine, the 6-second video site owned by Twitter.

The online video business is getting increasingly competitive and the dust is far from being settled on winners and losers. "It's a land grab at the moment," says Richard Broughton of research company IHS. "Most of the MCNs are trying to recruit clients almost regardless of the cost and this is typical of the approach of many companies in this sector."

When compared to the billions of views a month that an MCN like Machinima attracts with its largely user-generated videos of gamers playing video games, or Maker Studios, which helps talent create online content mainly for YouTube and is considered the largest MCN with 4bn monthly views, Rightster's topline viewing numbers look relatively small.

However, Muirhead argues that the monetisation Rightster achieves is much better. He is not interested in being what he terms a "new-age production company", preferring instead to provide the technology and software to help publishers bring in more revenue using a variety of methods, from advertising and subscriptions to licensing and brand sponsorship and taking a revenue share, licence fee or service fee for its services.

"We're not in a race to be number one in terms of traffic because I'm not sure that's a good business model," he says. "We want to represent the right content and by that I mean premium content that is valuable to advertisers and sponsors."

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