Six months ago, in an article titled The Future of Digital Media in 2015, TechCrunch posted several of my predictions for the digital media world in 2015. I later expanded that article for this blog to discuss my Top 10 Digital Media Predictions for 2015. It's now time to look back at the first 6 months of the year in digital media -- look at the top deals, developments and trends (top 2 trends so far are (1) the accelerating "off YouTube" video movement, and (2) the industry's justified virtual reality (VR) obsession -- more on both below) -- and see how my earlier predictions stand up. Consider this your "cheat sheet" of important activity in the digital media eco-system.
Here are my original Top 10 Predictions below -- juxtaposed against where we stand now.
I. PREDICTION (1) -- this one was really a two-parter:
PREDICTION (1) Part 1 -- The mobile-driven premium short-form video YouTube economy “grows up,” and traditional media companies finally take notice on a mass scale. Shell-shocked studio executives internalize that digital-first platforms are where they must be to reach smartphone-obsessed millennials. MCN acquisitions will quicken 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 ... sports-focused Whistle Sports (in which Manatt Venture Fund is invested).
THE REALITY FOR PART 1, 6 MONTHS LATER
Interestingly, for the first 6 months of 2015, the pace of MCN-related M&A had slowed -- and had been replaced by an accelerated pace of more cautious strategic investment as media companies struggle to develop their digital-first video strategies and are too afraid to go "all in." That "lull" proved to be temporary, punctuated by today's breaking news of German media giant ProSieben acquiring a majority stake in leading MCN Collective Digital Studio (CDS) (an MCN that had been flying somewhat "under the radar"). ProSieben had already owned 20% of CDS, so the deal (which values CDS together with its other MCN Studio71 plus significant new cash at $240 million) is logical. Strategic investors frequently "try" and then later "buy" if they like what they see.
I have always been bullish on those still-independent MCNs that had become market leaders and achieved significant scale. These include (i) Whistle Sports (the leading sports-focused MCN and is also a client), (ii) Tastemade (the leading food and travel MCN), (iii) Mitu (the leading Latino-focused MCN), (iv) Machinima (the leading young male/gamer-focused MCN), (v) DanceOn (the leading dance-focused MCN, also a client), (vi) Frederator (another "under the radar" MCN with an animation focus and strong leadership pedigree), and (vii) Zoomin.tv (a Euro-based "under the radar" MCN that has deep video production roots). All of these are "ripe" for M&A down the road -- a road that likely just got shorter today because one of their independent brethren (CDS) has just been taken off the table as of today.
So, given all this activity, 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 in 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 MCNs have shed that moniker (which most never really liked anyway) in favor of MPN -- as in, "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).
Here's a list of some of the most interesting related developments:
- Sports-focused Whistle Sports raised $28 million from strategics that included Euro-based media giants BSKYB and Liberty Global (Jan | Venturebeat)
- FremantleMedia increased its stake to become the majority owner of leading European MCN Divimove (Jan | Variety)
- Gamer-focused Machinima closed another $24 million financing led by Warner Bros. (Feb | The Wrap)
- Latino-focused MiTú Raised another $15 million from AMC Networks, among others (Feb | Recode)
- StarMaker Raised $6.5 million to grow its music/video app and talent network from Qualcomm Ventures and others (Mar | VideoInk)
- Otter Media's Fullscreen acquired social media studio McBeard (May | THR)
- Euro-based media giant RTL Group -- a true innovator amongst media companies in the digital-first new world order -- organized its overall MCN/MPN-related holdings (StyleHaul, BroadbandTV, SpotXchange and Clypd) into one central entity RTL Digital Hub (Jun | Broadband TV News)
- Live social streaming innovator Meerkat raised $12 million and Twitter launched competing Periscope to steal some (much?) of its thunder (Mar | TechCrunch)
- Verizon acquired once-giant digital media company AOL for $4.4 billion (May | Variety)
- Layer3 TV, the self-described “next-gen cable company,” raised $51 million from Participant Media and CAA among others (Jun | Multichannel)
- Video ad tech company TubeMogul raised $82.9 million in a secondary market offering (Jun | BI)
PREDICTION (1) Part 2 -- International also becomes a major new battleground for these borderless video opportunities.
THE REALITY FOR PART 2, 6 MONTHS LATER
Not surprisingly, international has become a major battleground -- and even more intensely perhaps than anticipated only 6 months ago. Here are some key data points (in addition to today's announced ProSieben/CDS deal -- which underscores this borderless global theme):
- Euro-based media powerhouses BSKYB and Liberty Global, as noted above, significantly invested in Whistle Sports' $28 million round
- Warner Bros., Sony Pictures Television and Asian telco giant SingTel created a new joint venture to launch their own "Netflix-Killer" for Asia (Jan | TechCrunch)
- MTV launched new international over-the-top apps, MTV Play (VOD) and MTV Trax (Music Streaming) in Germany, Switzerland and Romania (Feb | DigitalTVEurope)
- Culture Machine -- a new MCN/MPN focused on international content -- raised $18 million (Feb | VideoInk)
- 20th Century Fox partnered with leading Euro-based MCN Rightster to bolster its YouTube presence abroad -- with MCN Rightster's team managing Fox's YouTube marketing strategy for 35 channels across 17 international markets, including the U.K., Germany and France (Apr | THR)
- Canadian cable giants Rogers Communications and Shaw Communications entered into a joint venture to launch a new Canadian "Netflix Killer" called Shomi (May | THR)
- Chinese juggernaut Alibaba announced it too will soon launch its own "Netflix Killer" called TBO -- for China (Jun | Reuters)
- Netflix is now in 50 countries as of June 2015 (with close to 20 million international subs), with a major strategic push to China and plans to launch next in Italy and Portugal (Jun | THR)
- France media powerhouse Vivendi acquired DailyMotion, the YouTube of Europe, for approximately $240 million -- expect continued significant bold moves by this once-sleeping giant in the latter half of this year (Jun | Variety)
II. PREDICTION (2) -- Major consumer brands follow suit and act in earnest. Massive marketing dollars shift from traditional media to more measurable digital platforms in the form of branded content (not just ads), cannibalizing the former for the first time. Major investments are placed on ad-tech companies to maximize and measure those spends. We see a number of significant ad-tech exits like Yahoo!’s recent acquisition of BrightRoll for $640 million. Several brands go further and invest big to become digital-first lifestyle media companies themselves a la Red Bull, developing and aggregating content. GoPro, Pepsi and Marriott have proudly announced such ambitions.
THE REALITY, 6 MONTHS LATER
Certainly, brand activity has likewise accelerated, as brands begin to fully internalize the digital-focused transformation -- and opportunities -- of the media and entertainment business. Fewer examples of new Red Bull "wannabes" in the first half of this year, but certainly a proliferation of "branded content studios." And MCNs/MPNs are increasingly cutting out the middleman and playing the role of ad/creative agencies in the digital video eco-system. Here are some representative examples:
- Conde Nast unveiled its branded content shop powered by editors (Jan | WSJ)
- Relativity agreed to program and develop digital content for Lexus' L/Studio (Feb | THR)
- iHeartMedia Launched its own branded content studio (Feb | WSJ)
- Fullscreen launched a new strategic content group with former Chernin Group and Hulu execs (Feb | Variety)
- Kia partnered with Yahoo! to create new branded series (Apr | Digiday)
- CNN unveiled its new studio to produce content for advertisers (Jun | WSJ)
III. PREDICTION (3) -- Seeing all this activity, Silicon Valley investors increasingly make pilgrimages down South to the epicenter of media content – LA.
THE REALITY, 6 MONTHS LATER -- Few doubt this one. LA is a serious new VC battleground. Hale Boggs, Chairman of law and consulting firm Manatt Digital Media and the Manatt Venture Fund (which actively invests in digital media companies), confirmed this trend. "Many principals from major NoCal 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," Boggs said. Some, like Rothenberg Ventures (a highly connected NoCal-based VC which also opened the first virtual reality accelerator, River), have opened new offices in LA.
IV. PREDICTION (4) -- YouTube is increasingly under siege by new competing video platforms like Facebook and former Hulu chief Jason Kilar’s Vessel. These “off YouTube” platforms lure content creators away with promises of more compelling care, feeding and economics (including the tantalizing prospect of real subscription revenues).
THE REALITY, 6 MONTHS LATER -- 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 -- and Snapchat's own accelerating video focus (including its strategically significant Discover feature). "Off-YouTube" is a mantra chanted increasingly -- and with increasing volume -- across the globe right now. The threat is real. I addressed these developments in detail in two separate blog posts: (1) Facebook v. YouTube - Who Wins? 5 Part Test; and (2) YouTube v. Facebook, Amazon & Apple - Clash of the Video Titans (& the Role of DNA). But, let's also keep in mind that this is not a zero-sum game. All of this accelerating activity expands the overall video eco-system pie. So, yes, YouTube ultimately may hold less overall market share. But, there also will be much more to share.
V. PREDICTION (5) -- Traditional pay TV packages likewise increasingly are under fire in the “Great Unbundling” that began in 2014. What was unthinkable just one year ago (even 6 months ago!) became reality as HBO, CBS, Starz and others announced stand-alone over-the-top (OTT) services. A parade of others follow suit in 2015.
THE REALITY, 6 MONTHS LATER -- No traditional PayTV bundle is safe anymore. The "Great Unbundling" is real and comes in two flavors: (1) so-called "Skinny Bundles" --including DISH's Sling TV (which revolutionized the OTT space by giving "must have" ESPN as an add-on option); and Verizon's Custom TV); and (2) stand-alone OTT services (too numerous now to mention, but some of which are identified below). And, even the kids aren't safe! Nickelodeon anyone? Oh yeah, it too launched its own stand-alone OTT subscription service. In a truly remarkable sign of the times, Cablevision's CEO Kristin Dolan went so far as to speak the previously unspeakable amongst big traditional Pay TV providers -- announcing new "cord cutter" and "cord never" OTT packages. Well, if you can't beat 'em, join 'em. That's why Pay TV operators are increasingly willing to partner with SVODs (e.g., Cablevision offering Hulu and HBO Now). Here are some more important developments and deals:
- MTV launched its new international over-the-top apps, MTV Play and MTV Trax (Feb | DigitalTVEurope)
- Sony launched its $50/month Vue OTT service (Mar | CNN)
- In Canada, government regulators mandated sweeping changes to Pay TV packages, requiring providers to allow customers to "pick and pay" individual TV channels (Mar | Reuters)
- Discovery Digital launched new adventure-focused vertical OTT service, Seeker (Mar | Tubefilter)
- Traditional media grand-daddy NBC jumps on the Netflix-ian "binge viewing" band-wagon for its new show Aquarius (Apr | Variety)
- Levity Entertainment Group, backed by Irving Azoff and Madison Square Garden Entertainment, launched new comedy-focused YouTube channel Wait For It (May | Variety)
- Verizon announced its initial content partners for its upcoming mobile-first OTT service, including media giant Scripps (home to Food Network, Travel Channel, HGTV and more) (Jun | Variety)
- AMC Networks began its invite-only beta test of its new horror-focused OTT video service, Shudder (Jun | Variety)
- Discovery Communications announced it plans to launch its all-access OTT service, Dplay (which includes live sports content) later this year first in Denmark, Sweden and Italy (Jun | Variety)
- Showtime just launched its $10.99/month stand-alone OTT video service with initial distribution partners including Apple TV and Roku (July | TechCrunch)
VI. PREDICTION (6) -- Traditional media companies facing these tectonic shift in long-established business models – and major tech companies (Apple, Google, Amazon, Samsung) for which content is increasingly critical to fuel their own – take M&A seriously and one pulls the trigger as media and tech converges … literally.
THE REALITY, 6 MONTHS LATER -- No mega-M&A deal has materialized quite yet, but major media moves by the major "tech" players continue unabated. Some examples include (i) Amazon's ever-increasing investment in original programming (it just recently announced that it is "doubling down" on 2014's $1.3 billion original programming budget), and (ii) Apple's inevitable "coming soon" OTT video service (on top of its recently launched Apple Music). It may be only a matter of time before one of these tech behemoths -- each of which already cloaks itself with media trappings -- tries to make that full transformation real. At a minimum, Netflix -- the poster child for new, non-traditional media companies -- is directly in the line of sight.
And, in a significant related trend, telcos have placed themselves directly into the center of this video vortex. Cases in point: (i) AT&T and The Chernin Group's $500-$600 million Otter Media joint venture; (ii) Verizon's acquisition $4.4 billion acquisition of AOL; (iii) Dish Network's rumored merger talks with T-Mobile; and (iv) whispers to me from an industry insider that Vodafone may be eyeing Liberty Global.
VII. PREDICTION (7) -- On the music side, massive moves are made away from business model-challenged stand-alone services (Spotify and Pandora both still operate at a loss). Like Apple buying Beats (which was never about the economics of Beats Music), numerous potential behemoth buyers exist.
THE REALITY, 6 MONTHS LATER -- No M&A yet. And, while the M&A market waits, Spotify keeps raising boatloads of money -- the latest being a massive $526 million round announced in June at an $8.53 billion valuation. For its part, Pandora is also continuing its stand alone ways and has been rumored to be looking to acquire a true on-demand streaming service to weather the increasingly turbulent digital music storm. And while both Spotify and Pandora still operate at a significant loss, Apple finally launched its long-awaited Apple Music Spotify "Killer." This puts even greater pressure on those two services. As I recently wrote in a separate detailed analysis ("Spotify's Hangover From Apple's Hard Cider - 5 Daunting Dilemmas"), Apple can do what the stand-alone behemoths can't -- i.e., lose money in order to drive its over-arching multi-faceted business model. Putting a further exclamation on this point, just today, reports surfaced that Facebook is developing its own streaming music service to rival both Apple Music and Spotify. Hell, even Microsoft just joined the party more loudly by re-branding Xbox Music, Groove.
With all this action (particularly Apple Music), other behemoths (like Amazon, Google, Samsung ... perhaps even Facebook before it launches its own) continue to eye Spotify and Pandora ... from the side-lines ... for now.
VIII. PREDICTION (8) -- Gamers see real action too, as app developers increasingly focus on story-telling and compelling characters to build multi-platform media companies a la Rovio with Angry Birds. Rather than take traditional media properties and “gamify” them, these companies flip the model with an Apps-first approach. Finnish-based Silvermile and Seriously are two companies with Rovio roots to take … well … seriously. VR also enters the ring with gamers at mass in 2015.
THE REALITY, 6 MONTHS LATER -- Virtual Reality (VR) is the big story of the first 6 months in the digital media world. VR is absolutely top of mind of virtually everyone in the "industry" now on all sides of the house -- yes, games -- but also movies, education, travel, impact. On the games front, story-telling in a more strategic, holistic sense, is increasingly the norm with large-scale game developers. As a result of this frenetic activity, which includes continued massive VR-related investment (that noted futurist and VR thought leader Peter Diamandis already pegs at $5 billion of total invested capital), I have increased my VR-focused writing. Here are some recent blog posts about the media world's well-placed VR obsession : (i) Virtual Reality Update - Latest Developments; (ii) VR - Power, Potential, Risks ... Thoughts of Leading Innovators In This Immersive Space; (iii) VR - The Engine of Empathy ... And Real Social Change; and (iv) Jaunt, VR & The Future of Media & Entertainment.
IX. PREDICTION (9) -- Which leads to wearables, where we see an Oculus under every hard core gamer’s tree next year, alongside their parents’ new digital health/fitness watch.
THE REALITY, 6 MONTHS LATER -- Okay, we now won't see an Oculus under every gamer's tree this XMAS season. But, I didn't miss it by much. Oculus just recently announced that it will start selling its first mass consumer headset in early 2016. That's when things should really take off -- and early stage market leaders like Jaunt and Vantage.TV (a Rothenberg Ventures/River portfolio company) are accelerating content initiatives to meet that capacity -- as are juggernauts like GoPro (which is also harnessing the power of drones -- another major trend to watch -- literally) and Discovery Communications (which recently unveiled Discovery Virtual). After all, technology isn't holding up mass adoption of VR right now. Content is. And, that's changing fast.
X. PREDICTION (10) -- All of this leads to the big one – a concept I floated 2 years ago. Apple buys Tesla and installs Elon Musk as CEO. Now THAT would be a headline for 2015 … and for the ages!
THE REALITY, 6 MONTHS LATER -- "Hey Elon, it's Tim Cook calling. Wanna talk?"
[Special thanks to Manatt Digital Media's Mary Ermitanio for her help assembling much of the data in this article.]
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